By Matt Scuffham and Freya Berry
LONDON (Reuters) - Lloyds Banking Group will next week launch the sale of about 25 percent of its TSB business via a stock market flotation with the pricing expected to be below book value, banking industry sources told Reuters.
The amount of stock sold is likely to be at the bottom end of the guidance on how much the bank would sell, according to the sources, reflecting a cooling of investor interest in UK company flotations in recent weeks following a flurry of activity earlier in 2014.
TSB's Chief Executive Paul Pester said last November that Lloyds could initially sell between 30 and 50 percent of its shares in the business, which has 631 branches and 4.5 million customers making it Britain's seventh-biggest lender. However, Lloyds Finance Director George Culmer softened expectations in May, saying the bank would sell a minimum of 25 percent.
Banking industry sources say the IPO, which will happen before the end of June, is expected to value TSB at less than its book value of 1.5 billion pounds, meaning Lloyds will make a loss on the sale.
"They're being a bit more realistic on valuation. There's just not appetite in the market," one of the sources said.
"There's just a rash of consumer-exposed IPOs, and TSB is very consumer-focused."
Clothing chain Fat Face pulled its planned London listing on Thursday, citing market conditions as the main factor in its decision. Holidays-to-insurance firm Saga priced its IPO at the bottom of its original range.
"TSB a month ago would have been the hottest deal around," one banker told Reuters.
(Editing by Steve Slater)