Lloyds Banking Group has sold a further 11.5 per cent stake in TSB in a £161 million share placing to investors that required no discount to the market price following strong demand.

Lloyds said it sold 57.5 million shares at 280 pence, leaving it with a 50 per cent stake in the smaller bank. It is a further step towards meeting a deadline to sell all of TSB by the end of 2015 – set by European regulators as a condition of Lloyds’ government rescue during the financial crisis.

Sources familiar with the matter said demand for the shares outstripped the number available several times over, enabling Lloyds to sell the shares to mainly long-term investors.

Number of shares sold were less than some industry sources had expected

The sale attracted interest from investors in the US as well as Europe and buyers had been found to cover the sale within an hour of it being launched after the market closed on Thursday.

Investors were attracted by an exposure to Britain’s economic recovery via a bank which is untainted by issues of past misconduct, industry sources said. They see TSB as a viable challenger to Britain’s “Big Four” banks – Lloyds, Royal Bank of Scotland, Barclays and HSBC.

TSB is one of a number of British banks that have either recently listed on the stock exchange or are preparing to do so. The success of the latest sale could encourage other banks considering listings.

Aldermore said on Monday that it planned to list in London next month, in a debut that could value it at up to £900 million. Virgin Money, backed by entrepreneur Richard Branson, is expected to list later this year while Santander UK is also considering its options.

Reuters reported on Tuesday that Lloyds was preparing to launch a second TSB stake sale.

It sold a 38.5 per cent stake in TSB in June at 260 pence per share through an initial public offering, which valued Britain’s seventh-largest bank at £1.3 billion.

The number of shares sold was less than some industry sources had expected but leaves Lloyds well placed to meet the European regulator deadline. Industry sources say it is possible the remaining shares could be sold in two stages.

European regulators ordered Lloyds to sell the 631 branches which now form TSB by the end of 2015 as a condition for getting a £20.5 billion government rescue during the financial crisis, under state aid rules.

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