NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA, THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT
This announcement is an advertisement for the purposes of the Prospectus Rules of the UK Financial Conduct Authority (the "FCA") and not a prospectus and not an offer to sell, or a solicitation of an offer to subscribe for or to acquire, securities in the United States or in any other jurisdiction, including in or into the United States, Australia, Canada, Japan or South Africa. Investors should not purchase or subscribe for any ordinary shares referred to in this announcement except on the basis of information in the prospectus (the "Prospectus") in its final form expected to be published by TSB Banking Group plc ("TSB" or the "Company") in due course in connection with the proposed offer (the "Offer" or the "IPO") and the proposed admission of its ordinary shares (the "Ordinary Shares") to the premium listing segment of the Official List of the Financial Conduct Authority (the "Official List") and to trading on the London Stock Exchange plc's (the "London Stock Exchange") main market for listed securities (together, "Admission"). A copy of the Prospectus will, following publication, be available from the Company's registered office at 20 Gresham Street, London EC2V 7JE and online at tsbshareoffer.equiniti.com.
27th May 2014
Announcement of Intention to Float TSB Banking Group plc
As part of its divestment mandated by the European Commission (the "EC"), Lloyds Banking Group plc ("Lloyds") today announces its intention to proceed with an initial public offering of TSB Banking Group plc ("TSB").
TSB occupies a unique market position in British retail banking. TSB is a UK-only challenger brand with over 200 years of heritage, the capabilities of a large established player, including a comprehensive range of retail banking products and multi-channel and national distribution model, and the high growth potential of a challenger bank.
António Horta-Osório, Group Chief Executive of Lloyds Banking Group, said
"The decision to proceed with an initial public offering of TSB is an important further step for the Group as we act to meet our commitments to the European Commission. TSB has a national network of branches, a strong balance sheet 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."
Offer Highlights
· Lloyds intends to sell approximately 25% of the existing Ordinary Shares in TSB as part of its divestment mandated by the EC. Lloyds is required to sell down its remaining stake before 31 December 2015
· TSB will list on the premium segment of the Official List and the main market of the London Stock Exchange
· The Offer is expected to take place next month, with the publication of the Prospectus mid-June
· The Offer will be available to institutional investors in qualifying jurisdictions (in the UK and elsewhere outside the United States under Regulation S and to QIBs in the United States in reliance on Rule 144a) and to intermediaries in the UK, the Channel Islands and the Isle of Man who will facilitate the participation of their retail investor clients in those same jurisdictions (the "Intermediaries Offer"). The terms of the Intermediaries Offer will entitle each retail investor to receive one free share for every 20 Shares acquired (up to £2,000) and held for a continuous period of one year after IPO, subject to certain terms and conditions which will be set out in the Prospectus
· In respect of its residual holding of Ordinary Shares in TSB following the IPO, Lloyds has committed to a 90 day lock up arrangement following Admission
TSB Highlights
· TSB has a strong and stable customer base of 4.5 million retail customers, a comprehensive range of retail banking products and a multi-channel, national distribution model, including 631 branches, making it the seventh largest retail banking group in the UK by branch network
· TSB has a comparatively low-risk balance sheet and financial structure:
- TSB's balance sheet comprises primarily historically low-loss UK retail mortgages, funded by strong and stable customer deposits
- TSB benefits from significant economic protection against legacy issues, including historical conduct-related claims and losses and historical employment and pension legacy issues
- Services agreements with Lloyds provide a comprehensive range of IT and banking operations services which utilise Lloyds' proven operational infrastructure
- TSB has a strong capital base, a robust liquidity position and a 21.6% CRD IV fully loaded core equity tier 1 capital ratio (as at 31 March 2014 on a pro forma basis). TSB's illustrative core equity tier 1 capital ratio on a fully IRB basis is c.17%. TSB has the strongest capital position of the major UK high street banks1
· TSB has a dedicated management team, some of whom have led the development of the bank since 2011, including its launch on high streets across Britain last September. The team bring a unique mix of experience from across larger banks, challenger banks and regulatory bodies
· TSB expects to grow by building upon its existing strengths to:
o Grow its Personal Current Account ("PCA") market share
o Accelerate asset growth by re-entering the intermediary mortgage distribution channel in early 2015
o Deploy its considerable digital banking capability to reduce customer servicing costs, deepen existing customer relationships and create new customer relationships
The TSB Board intends, through the delivery of its strategic objectives, to grow TSB's franchise balance sheet by 40 to 50 per cent. over the next five years and over that period (based on market expectations as to interest rates, regulation and the competitive environment) to move towards double digit return on equity (whilst continuing to grow). TSB expects to pay an inaugural dividend in respect of the 2017 financial year.
Paul Pester, Chief Executive Officer of TSB Banking Group plc, said:
"Today is a significant milestone on our journey to create a major new competitive force in UK banking. Everyone involved in the creation of TSB has worked tirelessly to create something truly unique and to create a bank that brings more consumer choice and competition to the market. The TSB we see today is unlike any other UK retail bank: we have the mindset and growth potential of a challenger but with the scale and capabilities of an established player."
"As we prepare for life as an independent, listed entity we are aiming to deliver strong, steady and sustainable growth, over the long-term. Our straightforward and simple approach to banking is designed to deliver the kind of bank people tell us they want: every penny our customers deposit with us is used to support mortgages and loans for other TSB customers. This is what we mean by local banking for Britain."
TSB Key Strengths
(1) TSB has a strong and stable customer base, has developed a strong, values-led challenger brand position and is committed to offering a differentiated customer experience
· TSB has a strong and stable customer base
· The TSB Board believes that TSB's values-led challenger brand will be important in enabling TSB to differentiate itself from the established banks and gain market share
· TSB aims to deliver a differentiatedcustomer experience and drive reductions in customer acquisition and retention costs as well as enabling further growth
· Through mass appeal new products, such as the launch of a new PCA called the Classic Plus account in March 2014, TSB intends to introduce the TSB brand to a wide range of potential customers in the UK
(2) TSB has comprehensive distribution and product capability
· TSB has a multi-channel and national distribution model with a comprehensive service and sales capability
o TSB's network of 631 branches equates to approximately 6% of the retail bank branches in the UK and is complemented by four UK-based telephony contact centres
o TSB's service and sales capability has the infrastructure and many of the capabilities of a large established provider including internet and mobile banking capability
· TSB has a robust operating platform and operating model
o TSB's operating model is based on the equivalent Lloyds processes and procedures
o TSB's operating platform is underpinned by a comprehensive range of IT and banking operations services powered by the proven operational infrastructure of Lloyds Banking Group under the Transitional Services Agreement ("TSA") and a Long Term Services Agreement ("LTSA")
· The combination of TSB's high quality distribution channels and infrastructure supports its ability to offer a smooth and efficient service and sales process
(3) TSB is comparatively low-risk
· TSB has a comparatively low-risk balance sheet and financial structure
o TSB has a straightforward balance sheet consisting, as at 31 March 2014, of £23.3 billion of TSB branded customer deposits and £19.7 billion of TSB branded customer assets. As at the same date, TSB also held the beneficial title to an additional portfolio of non-TSB branded mortgages of £3.3 billion (the "Additional Mortgages")
o TSB has a strong capital base and robust liquidity with a core equity tier 1 capital ratio of 21.6%, and leverage ratio of 5.6% as at 31 March 2014 (on a pro forma basis). TSB's illustrative core equity tier 1 capital ratio on a fully IRB basis is c.17%
· TSB benefits from significant economic protection against legacy issues, including an indemnity from Lloyds against historical conduct-related losses
· TSB's operating model will benefit from on-going investment from Lloyds at no extra cost above the core service charge payable by TSB under the TSA and LTSA
(4) TSB has structural capacity for growth
· With approximately 6% of the retail bank branches in the UK against approximately 4.2% of the PCA stock, TSB's PCA market share of stock is not reflective of its branch footprint
· TSB also does not currently have access to the intermediary mortgage distribution channel but is expected to from Q1 2015
· TSB's operating platform is scalable and able to support growth, being based on that of Lloyds Banking Group, the UK's largest retail banking group
(5) There is significant potential for TSB to generate substantially improved returns in a rising interest rate environment
· A high proportion of TSB's customer mortgage assets are capped standard variable rate ("SVR") products at 2% above the Bank of England base rate. This is considerably lower than the average rate for non-rate-guaranteed products in the market. TSB believes customers will look over time, and as interest rates rise, to re-mortgage from capped SVR products onto higher margin mortgage products
(6) TSB has a strong and experienced management team
· TSB has been developed since 2011 by a dedicated management team who have strength of experience across larger banks, challenger banks and regulatory bodies
· TSB's executive directors and senior management team bring a wealth of experience (with both established and challenger banks) and expertise to the management and operations of TSB
TSB Strategy to enhance growth and returns
TSB has three clear strategic priorities in order to build upon its existing strengths to drive growth and enhance returns.
(1) TSB aims to grow its PCA market share to consistently achieve a share of gross flow that is in excess of the scale of its distribution channels
(2) TSB will aim to accelerate its asset growth by re-entering the intermediary mortgage distribution channel with the aim, in time, to sell a volume of mortgages through this channel that is consistent with its size
(3) TSB will deploy its considerable digital banking capability to reduce customer servicing costs, deepen customer relationships and create new customer relationships
TSB Key Management
Will Samuel - Chairman
Having worked over 35 years in merchant banking and corporate finance, Will brings a wealth of expertise of the banking sector and regulatory environment to his role as Chairman of TSB.
Will began his career at Coopers & Lybrand where he qualified as a Chartered Accountant. In 1977, Will joined Schroders in the Investment Management Division and worked in a variety of roles. In 1986, he was appointed a Director of Schroders plc as the Group Managing Director of Investment Banking. Schroders subsequently sold its investment banking business to Schroder Salomon Smith Barney (SSSB) in 1999 and Will served as Co-Chief Executive Officer at SSSB until 2003, when he was appointed Vice Chairman, European Investment Bank of Citigroup Inc.
Will joined Lazard & Co in 2004 as Vice Chairman and was appointed a Senior Advisor from 2011. In January 2012, Will was appointed Senior Advisor to the Financial Services Authority and, subsequently, Senior Advisor to the Prudential Regulation Authority, when he stepped down prior to his appointment as Non-Executive Chairman of TSB.
Will has held other Non-Executive Directorships including Chairman of H P Bulmer plc, Deputy Chairman of Inchcape plc, and Non-Executive Director of the Edinburgh Investment Trust plc. Will was Trustee and Honorary Treasurer of International Alert, a charitable peace building non-governmental organisation, from 2009 to 2014.
In addition to his role as Chairman of TSB, Will serves as the Chairman of Howden Joinery Group (formerly MFI Furniture Group) and Chairman of Ecclesiastical Insurance Group since 2006.
Will is a Fellow of the Institute of Chartered Accountants in England and Wales and has a First Class Honours Degree in Chemistry from Durham University.
Paul Pester - Chief Executive Officer
Having spent six years working for Sir Richard Branson as the Group CEO at Virgin Money and the past six years working for António Horta-Osório, first at Santander UK and then at Lloyds, Paul brings a unique mix of skills to his role as CEO of TSB.
After receiving his degree from Manchester University and a doctorate from Oxford University, Paul spent 10 years in management consultancy, the majority of those years being spent at McKinsey & Company. Paul took-up his first senior executive role as the Group CEO at Virgin Money in 2000. Having established the business in the UK, Australia and South Africa, Paul moved to Lloyds TSB as the Managing Director of Consumer Banking in 2005.
Paul joined Santander UK in 2008 where he led the acquisition of Bradford & Bingley and the subsequent integration of Abbey, Alliance & Leicester and Bradford & Bingley to create a single UK business.
In 2010 Paul joined Lloyds where he took up the role of Managing Director of Consumer Banking and Payments. In 2011 Paul was appointed CEO of the Verde programme through which he led the development and establishment of the new TSB Bank within Lloyds. In 2013 Paul was appointed as CEO of TSB.
Darren Pope - Chief Financial Officer
Darren is a qualified accountant with over 25 years of experience in the financial services industry, the majority of which has been spent in retail financial services.
Darren started his career in Corporate Development at Prudential plc where he was initially an M&A specialist and subsequently became part of the team that led the development of the Prudential Bank which subsequently became Egg. As one of the founders of Egg, Darren served as the internet credit card, savings and mortgage provider's UK Finance Director following its 2000 IPO.
Darren moved to Lloyds TSB in 2005 as Finance Director for the mortgage division where he was responsible for one of Europe's largest mortgage books on the acquisition of HBOS. It was from here that Darren was appointed to Project Verde in 2010 where he led all aspects of the programme before moving in to the CFO role in 2011.
Enquiries
TSB Banking Group
Martin Adams
Head of Investor Relations
Phone: +44 (0)20 700 39419
Email: [email protected]
Charlotte Sjoberg
Head of Media Relations
Phone: +44 (0) 207 003 9281
Email: [email protected]
Clinton Manning
Partner
Bell Pottinger (Financial PR advisor to TSB)
Phone: +44 (0)207 861 1605
Email: [email protected]
Lloyds Banking Group
Charles King
Investor Relations Director
Phone: +44 (0)20 7356 3537
Email: [email protected]
Matthew Young
Group Corporate Affairs Director
Phone: +44 (0)20 7356 2231
Email: [email protected]
Joint Global Co-ordinator, Joint Sponsor and Joint Bookrunner
Citigroup
John Sandhu
Robert Redshaw
Phone: +44 (0)20 7986 4000
Joint Global Co-ordinator, Joint Sponsor and Joint Bookrunner
J.P. Morgan Cazenove
Piers Davison
Simon Pilkington
Virginia Khoo
Charles Pretzlik
Phone: +44 (0)20 7742 4000
Joint Bookrunner and Joint-lead Manager
UBS Limited
Tim Waddell
Christopher Smith
Rahul Luthra
Phone: +44 (0)20 7567 8000
Joint-lead-Manager
Investec Bank plc
Christopher Baird
Joe Thompson
Phone: +44 (0)20 7597 4000
Joint-lead-Manager
Numis
Alex Ham
Andrew Holloway
Phone: +44 (0)20 7260 1000
Joint-lead-Manager
RBC Capital Markets
Darrell Uden
Duncan Smith
James Eves
Oliver Hearsey
Phone: +44 (0)20 7653 4000
Financial adviser to the Board of TSB in connection with the Offer
Rothschild
Stephen Fox
Adam Young
Phone: +44 (0)20 7280 5000
Intermediaries Offer enquiries
Charles Pretzlik (J.P. Morgan Cazenove)
Phone: 44 (0)20 7742 4000
Jeremy Wiseman (Scott Harris)
Phone: +44 (0)20 7653 0030
Notes to Editors:
1. Based on CET 1 ratios and leverage ratios of Barclays, HSBC, Lloyds Banking Group, Nationwide, RBS, Santander UK and Virgin Money as stated in the 2013 annual reports and accounts (except for Nationwide which is contained in the March 2014 offering circular but also based on 2013 data)
DISCLAIMERS
The contents of this announcement, which have been prepared and issued by, and are the sole responsibility of the Lloyds Banking Group plc, have been approved by Citigroup Global Markets Limited ("Citigroup") and J.P. Morgan Securities plc ("J.P. Morgan Cazenove") solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000, as amended.
Neither this announcement nor any copy of it may be taken or transmitted, directly or indirectly, into the United States, Australia, Canada, Japan or South Africa or to any persons in any of those jurisdictions or any other jurisdictions where to do so would constitute a violation of the relevant securities laws of such jurisdiction. The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions.
This announcement is an advertisement for the purposes of the Prospectus Rules of the FCA and not a prospectus and investors should not purchase or subscribe for any securities referred to in this announcement except on the basis of information in the Prospectus in its final form which is expected to be published by the Company in due course in connection with the Admission. A copy of the Prospectus will, following publication, be available from the Company's registered office at 20 Gresham Street, London EC2V 7JE and online at tsbshareoffer.equiniti.com.
This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any Ordinary Shares or other securities to any person in the Australia, Canada, Japan, South Africa, the United States or in any other jurisdiction to whom or in which such offer or solicitation is unlawful nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, or act as an inducement to enter into any contract or commitment whatsoever. The Offer and the distribution of this announcement and other information in connection with the Offer and Admission in certain jurisdictions may be restricted by law and persons into whose possession this announcement, any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
The securities referred to herein have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act") or under any securities laws of any state of the United States and may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state laws. There will be no public offering of securities in the United States.
The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may or should be placed by any person for any purpose whatsoever on the information contained in this announcement or on its completeness, accuracy or fairness. The information in this announcement is subject to change and does not purport to be full or complete. None of Lloyds Banking Group plc, Lloyds Bank plc (the "Selling Shareholder"), the Company, the underwriters (being Citigroup , J.P. Morgan Cazenove, UBS Limited, Investec Bank plc, Numis Securities and RBC Europe Limited (together, the "Underwriters")), or N M Rothschild & Sons Limited ("Rothschild") undertake to provide the recipient of this announcement with any additional information, or to update this announcement or to correct any inaccuracies, and the distribution of this announcement shall not be deemed to be any form of commitment on the part of Lloyds Banking Group plc or the Selling Shareholder to proceed with the Offer or any transaction or arrangement referred to herein. This announcement has not been approved by any competent regulatory authority.
This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates, "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. Forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business, results of operations, financial position, liquidity, prospects, growth and strategies. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance. Save as required by law or regulation, the Company does not undertake to release publicly the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in its expectations or to reflect events or circumstances after the date of the announcement.
The Company expressly disclaims any obligation or undertaking to update, review or revise any forward-looking statement contained in this announcement whether as a result of new information future developments or otherwise.
Citigroup, J.P. Morgan Cazenove, UBS Limited, Investec Bank plc, RBC Europe Limited and Rothschild, each of which is authorised and regulated by the Prudential Regulation Authority, and all the Underwriters and Rothschild, each of which is regulated by the Financial Conduct Authority in the UK, are acting exclusively for Lloyds Banking Group, the Selling Shareholder and the Company and no one else in connection with the Offer. They will not regard any other person as a client in relation to the Offer and will not be responsible to anyone other than Lloyds Banking Group, the Selling Shareholder and the Company for providing the protections afforded to their respective clients or for giving advice in relation to the Offer or the contents of this announcement or any transaction, arrangement or other matter referred to herein. Rothschild is acting exclusively for the Board of TSB and no one else in connection with the Offer and will not regard any other person as a client in relation to the Offer and will not be responsible to anyone other than the Board of TSB for providing the protections afforded to its clients nor for giving advice in relation to the Offer or any transaction or arrangement referred to in this announcement.
In connection with the Offer, each of the Underwriters and Rothschild or any of their respective affiliates, acting as investors for their own accounts, may subscribe for or purchase Ordinary Shares and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own accounts in such Ordinary Shares and other securities of the Company or related investments in connection with the Offer or otherwise. Accordingly, references in the Prospectus, once published, to the Ordinary Shares being issued, offered, subscribed, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or subscription, acquisition, placing or dealing by, the Underwriters, Rothschild or any of their respective affiliates acting as investors for their own accounts. In addition, certain of the Underwriters, Rothschild or their affiliates may enter into financing arrangements and swaps in connection with which they or their affiliates may from time to time acquire, hold or dispose of Ordinary Shares. The Underwriters and Rothschild or any of their respective affiliates do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.
None of the Underwriters, Rothschild or any of their respective subsidiary undertakings, affiliates or any of their respective directors, officers, employees, advisers, agents or any other person accepts any responsibility or liability whatsoever for, or makes any representation, warranty or undertaking , express or implied, as to the truth, accuracy, completeness or fairness of the information or opinions in this announcement (or whether any information has been omitted from the announcement) or any other information relating to the Company, its subsidiaries or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of this announcement or its contents or otherwise arising in connection therewith.
The Offer timetable, including the date of Admission, may be influenced by a range of factors such as market conditions. There is no guarantee that the Offer and Admission will occur and you should not base your financial decisions on Lloyds Banking Group's intentions in relation to the Offer and Admission at this stage. Acquiring investments to which this announcement relates may expose an investor to a significant risk of losing all of the amount invested. The value of Ordinary Shares can go down as well as up. Potential investors should consult a professional advisor as to the suitability of the Offer for the person concerned. Past performance cannot be relied upon as a guide to future performance.
In connection with the Offer, a stabilising manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot Ordinary Shares or effect other transactions with a view to supporting the market price of the Ordinary Shares at a higher level than that which might otherwise prevail in the open market. The stabilising manager may, for stabilisation purposes, over-allot Ordinary Shares up to a maximum of 10 per cent. of the total number of Ordinary Shares comprised in the Offer. The stabilising manager will not be required to enter into such transactions and such transactions may be effected on any securities, market, over-the-counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on the date of the commencement of conditional dealings of the Ordinary Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter. However, there will be no obligation on the stabilising manager or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilising measures, if commenced, may be discontinued at any time without prior notice. In no event will measures be taken to stabilise the market price of the Ordinary Shares above the offer price. Save as required by law or regulation, neither the stabilising manager nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilisation transactions conducted in relation to the Offer.
Certain figures contained in this document, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this document may not conform exactly with the total figure given.
