High demand for TSB shares triggers share increase

Shares in the newly created UK challenger TSB have risen by 10% following its stock market debut, which valued the company at £1.3bn ($2.2bn).

Shares in the newly created UK challenger TSB have risen by 10% following its stock market debut, which valued the company at £1.3bn ($2.2bn).

There is currently only a 38.5% stake in TSB up for grabs, up from the 27.5% that was first planned. The floatation was priced at 260p, on a range of 220-290p.

The rise in share price to 289p from dealing between City institutions gives TSB a market capitalisation of $1.45bn, down £130m from the Lloyds valuation of £1.58bn.

The high demand and jump in share price is a good sign for Lloyds as the group is required to sell off TSB by the end of 2015 as part of the EU bailout deal it secured in 2009.

The rise in share price was spurred on by comments from the bank of England governor Mark Carney recently that interested rates could finally rise in the UK in 2014. This will add value to TSB mortgage portfolio, as its high quantity of capped standard variable-rate loans will likely be refinanced to more profitable fixed-rate products.

António Horta-Osório, Lloyds chief executive, said: “TSB has a national network of branches, a strong capital base, robust liquidity and significant economic protection against legacy issues. “It is already operating on the UK high street and is proving to be a strong and effective challenger, further enhancing competition in the UK banking sector.”

The IPO is set to create the seventh largest retail lender to compete with the big four in the UK with a target current account share of 6%, up from 4.4% now.

The UK government currently holds a 24.9% stake in the company but will be looking to sell this off later in 2014.

The high demand and increase in share price further shows that Co-op were getting a bank at 50% off with its Project Verde deal which fell through in mid 2013 when the Co-op was discovered to be sporting a £1.5bn black hole.

 

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