Lloyds’s TSB Bank Said to Find Buyers in IPO at Discount

Photographer: Matthew Lloyd/Bloomberg

A customer, left, passes their savings book to an employee inside a branch of TSB, part of the Lloyds Banking Group Plc, in London. Lloyds, 25 percent owned by the British taxpayer, has until the end of 2015 to dispose of TSB. Close

A customer, left, passes their savings book to an employee inside a branch of TSB, part... Read More

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Photographer: Matthew Lloyd/Bloomberg

A customer, left, passes their savings book to an employee inside a branch of TSB, part of the Lloyds Banking Group Plc, in London. Lloyds, 25 percent owned by the British taxpayer, has until the end of 2015 to dispose of TSB.

Lloyds Banking Group Plc (LLOY) has buyers for all the shares of its TSB Bank Plc after offering the stock to investors at a discount, said two people with knowledge of the matter.

Investors placed orders for all the shares as well as for an overallotment option on the first day of the initial public offering, the people said, asking not to be identified as the details aren’t public. At the midpoint of an announced price range of 220 pence and 290 pence apiece, TSB will be valued at about 1.28 billion pounds ($2.15 billion), Lloyds said in a statement today.

That would value the bank at less than its 1.5 billion-pound book value, or the value of its assets minus liabilities, Vivek Raja, an analyst at Oriel Securities, wrote in a note to clients. London-based Lloyds, Britain’s biggest mortgage lender, must sell TSB to meet European Union demands after it took state aid during the financial crisis.

“It’s priced to go,” said Shailesh Raikundlia, an analyst at Espirito Santo Investment Bank in London, who has a sell rating on Lloyds. “They just want to get it done.”

Investors have become more selective in what they buy as London has its busiest IPO year since 2007. Saga Plc, a provider of insurance and holidays to Britain’s over-50s, priced its May IPO at the bottom of its range, and the shares have fallen since then. Other companies, including Fat Face Group Ltd., have postponed their IPOs.

Shares Decline

ING Groep NV, the biggest Dutch financial-services company, said this month it plans to sell shares of its European insurance unit in an IPO as early as July.

Lloyds fell 1.7 percent to 78.82 pence in London trading, the next-to-worst performer in the Bloomberg Europe Banks and Financial Services Index. The shares are little changed this year.

TSB will sell about 125 million shares, or 25 percent of its stock in the IPO that will price on June 20.

Should TSB sell shares at the midpoint of the IPO range, it would have a price-to-book-value ratio of about 0.85, almost half Lloyds’s own 1.4 price-to-book ratio, said Oriel’s Raja, who has a buy rating on Lloyds.

Barclays Plc (BARC), the U.K.’s second-biggest lender by assets, trades at a price-to-book ratio of 0.71, while Royal Bank of Scotland Group Plc trades at 0.64. HSBC Holdings Plc and Standard Chartered Plc trade at 1.08 and 1.18 respectively.

Banks IPOs

TSB’s share sale is the largest of the banks trying to compete against Britain’s four biggest lenders.

OneSavings Bank Plc, backed by J.C. Flowers & Co., sold shares in an IPO last week that raised 134 million pounds. Others, including Aldermore Bank Plc and Virgin Money, are also considering stock offerings.

Lloyds, 25 percent owned by the British taxpayer, has until the end of 2015 to dispose of TSB. U.K. regulators and politicians are seeking to increase competition in Britain’s consumer-banking market, which is dominated by Lloyds, RBS, Barclays and HSBC.

TSB said it made a pretax profit, before changes to the value of its own debt, of 52 million pounds for the first quarter of 2014, without giving details of a comparable period a year earlier. Net income was 60 million pounds, and revenue was 232 million pounds over the period.

The lender said full-year pretax profit on an underlying basis climbed to 113 million pounds in 2013 from 39 million pounds the year earlier. Net income rose to 172 million pounds from 28 million pounds, and revenue increased to 798 million pounds from 737 million pounds.

TSB said it would pay 3 million pounds in fees and costs and Lloyds would bear one-time fees and costs of about 33.2 million pounds related to the IPO. Citigroup Inc. and JPMorgan Chase & Co. are among banks managing the sale, and Rothschild is advising on it.

To contact the reporters on this story: Richard Partington in London at rpartington@bloomberg.net; Ruth David in London at rdavid9@bloomberg.net; Alexis Xydias in London at axydias@bloomberg.net

To contact the editors responsible for this story: Edward Evans at eevans3@bloomberg.net Steve Bailey, Jon Menon

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