Lloyds Sells 50% of TSB to Spanish Bank

Analysts approve of Lloyds sale of 50% stake in TSB to Spanish bank Sabadell, helping put the troubled high-street bank back on the path to business-as-usual

Erin Davis 23 March, 2015 | 10:04AM
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We’re glad that Lloyds (LLOY) has agreed to sell its remaining 50% stake in the challenger bank TSB to the Spanish bank Sabadell, as the transaction will bookend what has been a time-consuming distraction for management and put Lloyds even further down its path to producing business-as-usual results for shareholders.

Lloyds was required to sell the bank as part of its agreement with the European Commission in the wake of its bailout during the financial crisis. We don’t expect the sale to affect our fair value estimate for the narrow-moat bank, and we continue to see the shares as materially undervalued.

We see the agreed-to price for TSB as moderately attractive for Lloyds. Sabadell will pay £3.40 per share, a 30% premium to TSB’s June IPO price but a mere 4% premium to TSB’s year-end book value. Despite this premium, Lloyds will take a manageable £640 million charge on the sale, which reflects the costs of the transaction and the £450 million Lloyds has agreed to give TSB to fund its IT operations.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Lloyds Banking Group PLC46.48 GBP0.00Rating

About Author

Erin Davis  is a senior banking analyst for Morningstar.