Go IPO! Lloyds sets TSB float in motion

IPO WATCH: IPO fever could soon start sweeping the nation as Lloyds fires the starting gun on the TSB float.

by Rachel Savage
Last Updated: 25 Apr 2014

Lloyds Banking Group has kicked off its £1.5bn-plus float of TSB by schmoozing potential investors this week, after turning down a bid for the new bank at the end of last year.

TSB chief exec Paul Pester, accompanied by finance chief Darren Pope and JP Morgan and Citi bankers, began parading the 631-branch bank round the Square Mile on Monday. The meetings come ahead of a formal investor roadshow that will see Lloyds float 30-50% of the bank in an initial sale in May, according to the Telegraph.

It’ll probably be relieved to see the back of TSB. The European Commission demanded Lloyds get rid of it in return for the £20bn government bailout back in 2008 after its disastrous merger with HBOS. Then the Co-op was definitely going to buy the branches, before proceeding to fall flat on its face over the deal.

That failed sale played a large part in Lloyds decision to turn down an offer for the bank from W&G Investments, a group led by former Tesco personal finance chief Andy Higginson, according to the Telegraph.

The group, backed by 25 institutional investors including Schroders and Henderson, went after TSB in November only to be turned down by Lloyds the following month. They also failed to buy the 315 branch Williams & Glyn business off RBS last year. If at first you don’t succeed…

Pester has apparently been trying to sell TSB’s future growth, highlighting the potential of 164 branches that used to be part of the Cheltenham & Gloucester building society. Given how much banking is still migrating online, investors may not be so sure.

That could motivate City denizens to demand a discount on the IPO. With Lloyds shares trading at 1.3 times book value and TSB valued at £1.5bn, the float could be £1.6-£1.8bn, fund managers told the Telegraph. The deal does, however, have one enormous plus in its favour – it’s the first big IPO out of the blocks this year, so right in line to cash in on the City’s rediscovered optimism.

On the other hand, other banks are getting rid of jobs and their physical high street presence, not growing them. Lloyds itself announced yesterday that it would get rid of 1,080 jobs and outsource at least 310 further roles, taking its total staff cuts since 2011 to 11,760.

It was Barclays turn to wield the axe today, announcing it would close a quarter of its 1,600 branches, replacing them with smaller outlets in Asda supermarkets (mortgages in the bread aisle anyone?). After announcing 3,700 job cuts at the end of last year, Barclays is also ending its sponsorship of London’s Boris bikes and thinking about terminating its £40m annual Premier League sponsorship deal.

However, while banks are making us all look lazy with their brutal slimming regimes, this year’s IPO frenzy may only be getting started. Everyone from discount retailer Poundland to over-50s insurer Saga is eyeing up the stock market – those newly-trim financiers might have a fat year ahead after all…

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