I have had some drains up in the last few hours and some answers to Panmure’s concerns over the TSB float have been answered. We shouted these issues from the roof tops and I am pleased to say that there are members of human race out there, willing and able to help! – For which thank you!

The discrepancy in valuation has manifested itself for two reasons – Firstly improved market conditions since the dark days of the ‘Coop’ dalliance! Secondly the loan of £3.3 billion assets made by Lloyds to TSB – mainly mortgage business – is expected the generate £230 million profit up until 2017, the agreement having been in place since the start of the year. This profit will go towards funding growth, opening new branches and investing in digital capabilities. Consequently the cost base is higher with a view to giving growth every chance.

At present, due to a prior agreement with the Cooperative Bank, TSB has no participation in the intermediary mortgage market. The introductory mortgage market constitutes 50% of all mortgages. TSB, using a clone of the Halifax model, would hope to generate several billion worth of extra business – so that goes some way to allaying fears on future profits.

As for IT business TSB has a 10-year agreement with Lloyds Banking Group. However, as I understand it, there is a break in the agreement at about 2.5 years if TSB wishes to plough its own individual furrow. furrow and – crucially – Lloyds will either provide a “cloned and carved-out” version to transfer to a third party. If TSB choses to migrate its data to the systems of a third-party IT provider Lloyds will pay a £450million contribution to TSB’s costs.

Finally retail investors are entitled to as much information as possible – however some of this research must be INDEPENDENT. So the sooner the prospectus is announced the better for all concerned. It will take the sting of the unknown out of the equation. To date, according to Bloomberg, all IPOS in the UK are showing just an average of 1% gain in 2014. So, if this TSB IPO was to be offered up as a ‘snip’ for retail investors, who would carp against that idea? Just probably the Labour front bench! The taxpayer and the retail investor deserve to have a cut at the spoils of war. We just need to know all the facts.

These are David Buik personal views

Twitter – @truemagic68

David Buik

Market Commentator

D +44 (0)20 7886 2775
Panmure Gordon & Co
One New Change | London | EC4M 9AF | United Kingdom
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