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British bank Lloyds to float 25 percent of TSB

Chris Ratcliffe | Bloomberg | Getty Images

Lloyds Banking Group said on Tuesday it will float about 25 percent of its TSB business on the London Stock Exchange, with the remainder sold before the end of 2015.

Banking industry sources said last week they expect TSB to be priced at less than its book value of 1.5 billion pounds ($2.53 billion), meaning Lloyds would make a loss on the sale of the 200-year old brand.

Lloyds is required to sell the 631 branches making up TSB because of a European Union requirement that Lloyds creates more competition in the UK market after receiving state aid in the financial crisis.

"TSB has a national network of branches, a strong balance sheet and significant economic protection against legacy issues," Lloyds' chief executive Antonio Horta-Osorio said in a statement.

The offer is expected to take place in June, with the publication of a prospectus mid-June.

Industry sources said last week the pricing of the TSB offer is expected to be at the bottom end of guidance on how much the bank would sell, reflecting a cooling of investor interest in UK company flotations after a flurry of activity earlier in 2014.

The sources said they expect TSB to be priced at less than its book value of 1.5 billion pounds ($2.53 billion), meaning Lloyds would make a loss on the sale of the 200-year old brand.

TSB has 4.5 million high street customers, making it Britain's seventh largest retail banking group by branch network, equivalent to 6 percent of Britain's retail bank branches.

Lloyds said TSB has a core Tier 1 capital adequacy ratio of about 17 percent of its assets, which Lloyds said is the strongest of the major high street UK banks.

The TSB board is aiming to expand the bank's balance sheet by 40 to 50 percent over the next five years and pay an inaugural dividend in respect of the 2017 financial year.

On 31 March 2014 TSB had 23.3 billion pounds of deposits and 19.7 billion of assets.



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