Five Questions On: The TSB flotation

What's happening?

Lloyds Banking Group plans to float a 25 per cent stake in its TSB business on the stock market. Although TSB shares will be mainly offered to institutional investors, the public can buy some too.

Why is Lloyds selling part of TSB?

Lloyds has to shrink its business to meet EU rules on state aid following being bailed out by the taxpayer in 2008. Owned 24.9 per cent by the taxpayer, the group is being forced to dispose of a certain number of branches. The Co-op was going to buy them last year but the deal fell through amid the exposure of a £1.5bn black hole in the Co-op Bank's accounts. Lloyds now has until the end of 2015 to entirely dispose of its stake in TSB.

What is TSB anyway?

The Trustee Savings Bank was founded in 1810 in Dumfriesshire by the Rev Henry Duncan. It disappeared from the high street 18 years ago when it merged with Lloyds – but the name made a comeback last autumn as a standalone brand.

TSB has 631 branches and 4.5m retail customers and is headed by chief executive Paul Pester. He's trying to distinguish the bank from larger rivals by promoting its absence from investment banking and advertising the autonomy afforded to local branch managers.

Sounds good. How can I get my hands on the shares?

Individual investors will be able to buy shares through stockbrokers and sharedealing services that will act as intermediaries once the offer period begins, probably in June. The minimum application amount will be £750.

Investors will get one free share for every 20 shares they buy (up to the value of £2,000) and hold for a period of one year after the float.

The free share offer comes in place of dividends, which the bank does not expect to begin paying until 2017.

How much will the shares cost?

We don't know yet – Lloyds will set the share price in due course and a share prospectus will likely be published next month.