A number of planned listings have been pulled, including FatFace and online retailer the Hut, amid growing signs of a slowdown in investor appetite.
Few doubt that TSB will be popular, but the pricing will take the current cooling of sentiment into account and already the share issue includes a get-one-free offer to entice retail customers. Investors will have to decide whether the long wait for a dividend – 2017 – makes the free shares a big enough incentive.
The valuation is not expected to provide Lloyds with a price tag much above book value, if at all.
Aside from these points, this will be an important milestone in carving TSB out of Lloyds, though there is still a long way to go before it can be truly regarded as a standalone operation. It will continue to use Lloyds’ IT systems and there will be suspicions of cross-marketing while the two retain a link.
There is also talk of new management and some cost-cutting in order to drive up margins. While it will be a substantial “challenger” bank with an expected 6 per cent market share in five years time, it will face considerable pressures competing with the dominant players.
However, it comes to market as a “clean” bank without the bad debts and other toxic baggage that its parent has been attempting to shed. To that extent it should appeal both to investors and customers seeking a simpler banking model with no skeletons in the cupboard.
The flotation is the first of three for the banks and will be a test of institutional and public support for a sector still suffering a tarnished reputation. Royal Bank of Scotland will list a batch of branches under the revived Williams & Glyn banner, followed by its Citizens brand in the US.
Together with the flotation of Direct Line insurance, the need to take each one through a listing highlights the lack of interest from trade buyers in banking assets which may yet be reflected in their share prices.
Carney opens up debate on capitalism’s morality
When he took over as governor of the Bank of England last summer Mark Carney provided an immediate array of new ideas and fresh thinking, but he was also chastised for being a little too political.
Yesterday, at a conference in London, he risked going there again when he spoke of the inequalities that have opened up in society.
There was “disturbing evidence that equality of opportunity has fallen, with the potential to reinforce cultural and economic divides”, he said, going on to challenge capitalism’s moral compass. “Capitalism loses its sense of moderation when the belief in the power of the market enters the realm of faith,” he said, clearly referring to the years of excess and reckless zeal.
He questioned whether social welfare systems enjoyed by previous generations could be afforded by future ones and noted that “environmental degradation remains unaddressed, a tragic embarrassment now seldom mentioned in either polite society or at the G20”.
These are issues that lie at the heart of a debate on economic development but also relate to the sort of society it creates.