Should You Invest In The TSB Flotation?

Lloyds Banking Group PLC (LON: LLOY) is set to sell off TSB.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The full reprivatisation of Lloyds Banking Group (LSE: LLOY) (NYSE: LYG.US) has been on the cards for some time, with the government selling off the second tranche of the shares acquired as part of the bail-out.

The bank has also split itself back in the its previous brands, of Lloyds and TSB, with the intention to float TSB as an independent company — much to the confusion of a lot of customers at my local branch of Lloyds, er, I mean TSB, who suddenly learned the nearest branch they could do all their business at was a mile away.

TSB float

TSBAnd that initial public offering is expected to happen next month, with The Telegraph reporting a commencement date of 19 May, and the shares trading by the end of the month.

The question for us, as private investors, is easy — should we try to buy some? The answer is not at all obvious.

On the one hand, Lloyds (and, of course, the government) will be wanting this sale to be seen as a big success — we’ve already seen the giveaway pricing of the Royal Mail flotation. So surely they’ll price the offering attractively, won’t they?

Under pressure

The minor stock market slide we’ve seen recently will also put downwards pressure on the flotation price.

LLOYIn fact, since the start of January we’ve seen the Lloyds share price going into decline — from a 12-month peak of 86.8p, the shares have shed 15% of their value to today’s 73.4p.

Other optimism comes from Lloyds’ progress on the liquidity front. For the year ended December 2013, the bank recorded a Core Tier 1 ratio of 14%, which was up from 12% a year previously and twice the 7% demanded by current regulatory requirements — and that’s quite an improvement from the mere 5.6% it could muster in the dark days of 2008.

Bargain priced?

Against that, The Telegraph reports that some investors are seeing early proposed valuations of TSB as being somewhat optimistic, suggesting that the overall value of the bank might have to be lowered to less than its book value of £1.5bn. And that could end with a smaller chunk of TSB being floated than the hoped-for 50%.

The decision whether to buy will, of course, depend on the details of the offering — we’ll need to see the value and quality of the assets of an independent TSB together with its liquidity status. And we’ll know the full details when the prospectus is published.

Optimism

For now, with the keenness for this offering to go well, I think the odds of an attractive flotation price are on the side of investors, and at the moment I’m cautiously optimistic.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan does not own shares in Lloyds Banking Group.

More on Investing Articles

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Buying 8,617 Legal & General shares would give me a stunning income of £1,840 a year

Legal & General shares offer one of the highest dividend yields on the entire FTSE 100. Harvey Jones wants to…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

£25k to invest? Here’s how I’d try to turn that into a second income of £12,578 a year!

If Harvey Jones had a lump sum to invest today he'd go flat out buying top FTSE 100 second income…

Read more »

Union Jack flag in a castle shaped sandcastle on a beautiful beach in brilliant sunshine
Investing Articles

2 lesser-known dividend stocks to consider this summer

Summer is here and global markets could be heading for a period of subdued trading. But our writer thinks there…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Here’s how I’d aim to build a £50K SIPP into a £250K retirement fund

Our writer outlines the approach he would take to try and increase the value of his SIPP multiple times in…

Read more »

Investing Articles

9.4%+ yields! 3 proven FTSE 100 dividend payers I’d buy for my Stocks and Shares ISA

Our writer highlights a trio of FTSE 100 shares with yields close to 10%. He'd happily pop them into his…

Read more »

Mixed-race female couple enjoying themselves on a walk
Investing Articles

Are Raspberry Pi shares a once-in-a-lifetime chance to get rich?

With Raspberry Pi shares surging after a successful IPO, could this UK tech startup offer a long-term wealth creation opportunity…

Read more »

Newspaper and direction sign with investment options
Investing Articles

Huge gains and 9% yields: why now’s an amazing time to be a stock market investor

The stock market’s generating fantastic returns in 2024. Whether you're looking for gains or income, it’s a great time to…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

This steady dividend payer looks like one of the best bargain stocks in the FTSE 100

A yield of 4.7% and a consistent dividend record make this FTSE 100 company look like good value in an…

Read more »