Lloyds Sells More Shares Than Expected in I.P.O. of TSB Unit

Updated, 3:07 p.m. |

LONDON — The Lloyds Banking Group said on Friday that it had sold more shares in the initial public offering of its TSB Banking Group unit than originally anticipated because of high investor demand.

The bank sold 35 percent of the outstanding shares in TSB and could publicly offer as much as 38.5 percent of the unit if an overallotment of shares is fully exercised. Lloyds had originally planned to sell 25 percent.

The offering was priced at 2.60 pounds a share, the midpoint of its recently revised range of £2.50 to £2.70. The I.P.O. valued TSB at £1.3 billion, or about $2.2 billion.

Shares of TSB rose 12 percent, to £2.90, in conditional trading in London on Friday. Unrestricted trading of the stock is expected to begin on Wednesday.

The offering, as anticipated, was below what analysts believed was the book value of TSB as a stand-alone entity. Analysts have said the unit would have a book value of roughly £1.5 billion.

But Lloyds, which is partly owned by the British government, is required to divest itself of the TSB network of 631 branches by the end of 2015 under the terms of its government bailout during the financial crisis.

“The successful initial public offering of TSB is an important further step for Lloyds Banking Group as we act to meet our commitments to the European Commission,” António Horta-Osório, the chief executive of Lloyds, said in a statement.

The demand for shares “reflects investors’ confidence in the prospects for the business,” he said.

TSB has about 4.5 million retail customers and would be the seventh-largest retail bank in Britain after the offering.

The pricing of TSB comes as the market for I.P.O.s in London shows signs that it may be cooling.

Wizz Air, a Hungarian budget airline, and Fat Face, a British retailer, have both pulled their planned offerings recently, citing market conditions.

Saga, a travel and insurance provider for people over 50, also has traded below its offer price since shortly after it went public in May.

Appetite has generally remained strong for I.P.O.s in London, but firms have rarely priced their offerings at the high end of their pricing ranges in recent months as investors remain price conscious. (In Britain, I.P.O.s often go through what equates to three rounds of roadshows and investor engagement before offerings are priced.)

Since the beginning of April, only two offerings — Just Eat and Exova Group — have priced at the high end of their expected range, according to data from Thomson Reuters.

Seven deals, including TSB, have priced at or near the midpoint of their range, while seven have priced at the low end of their range.