Lloyds Banking Group has sold a further 11.5% stake in TSB in a £161mn share placing to investors that required no discount to the market price following strong demand.
Reuters/London
Lloyds Banking Group has sold a further 11.5% stake in TSB in a £161mn ($262.5mn) share placing to investors that required no discount to the market price following strong demand. Lloyds said it sold 57.5mn shares at 280 pence, leaving it with a 50% stake in the smaller bank. It is a further step towards meeting a deadline to sell all of TSB by the end of 2015 – set by European regulators as a condition of Lloyds’ government rescue during the financial crisis.
Sources familiar with the matter said demand for the shares outstripped the number available several times over, enabling Lloyds to sell the shares to mainly long-term investors.
The sale attracted interest from investors in the US as well as Europe and buyers had been found to cover the sale within an hour of it being launched after the market closed on Thursday.
Investors were attracted by an exposure to Britain’s economic recovery via a bank which is untainted by issues of past misconduct, industry sources said. They see TSB as a viable challenger to Britain’s “Big Four” banks – Lloyds, Royal Bank of Scotland, Barclays and HSBC.
TSB is one of a number of British banks that have either recently listed on the stock exchange or are preparing to do so. The success of the latest sale could encourage other banks considering listings.
Aldermore said on Monday that it planned to list in London next month, in a debut that could value it at up to £900mn. Virgin Money, backed by entrepreneur Richard Branson, is expected to list later this year while Santander UK is also considering its options.
Reuters reported on Tuesday that Lloyds was preparing to launch a second TSB stake sale.
It sold a 38.5% stake in TSB in June at 260 pence per share through an initial public offering, which valued Britain’s seventh-largest bank at £1.3bn. Lloyds agreed not to sell any more shares for 90 days following the first sale in a lock-up which expired on Tuesday and had a small window in which it could sell more shares before a closed period ahead of the bank’s third-quarter results.
The number of shares sold was less than some industry sources had expected but leaves Lloyds well placed to meet the European regulator deadline. Industry sources say it is possible the remaining shares could be sold in two stages.
Because Lloyds, which was advised by UBS on the disposal, retains 50% of TSB, the smaller bank will continue to be consolidated within its accounts.
“We regard the small overnight placing as a win-win for both Lloyds and TSB,” said Investec analyst Ian Gordon. “We continue to see more material upside for Lloyds’ share price, while TSB, in our view, represents a very solid defensive play underpinned by a strong growth story in the longer term.”
European regulators ordered Lloyds to sell the 631 branches which now form TSB by the end of 2015 as a condition for getting a £20.5bn ($33.4bn) government rescue during the financial crisis, under state aid rules.