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Lloyds to raise TSB float price to cash in on demand

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Lloyds to raise TSB float price to cash in on demand

Lloyds Banking Group could raise the float price of TSB shares to cash in on strong demand from investors.

The state-backed bank last week priced the shares at 220p-290p, but according to  Sky News, Lloyds could move the bottom end of the range up to 240p.

The initial public offering (IPO) will see Lloyds sell 25% of its shares with its remaining stake set to be offloaded by the end of next year. And while this coming glut of supply might be expected to depress the float price, some believe that the sheer weight of demand from IPO-hungry investors and the prospect of interest rates rising sooner than expected could see TSB come to market with a rich valuation.

TSB, which will have a market share of 4.2%, is considered a low growth bank, but a potential earlier rate hike, hinted at by Bank of England governor Mark Carney last week, would boost its margins. TSB offers market-leading interest rates of up to 5% on its current accounts.

If TSB comes to market at the 255p mid-point, it would value the company at £1.275 billion, equated to around 0.85x its book value. Kames UK Equity Absolute Return manager David Griffiths said fair value would be closer to 0.7x book value.

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David Griffiths
David Griffiths
13/18 in Alternative UCITS - Market Neutral (Performance over 3 years) Average Total Return: 2.79%
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