Lloyds Bank to price TSB IPO below book value: sources

Lloyds will publish the pricing and prospectus for an initial public offering of TSB shares on Monday, the sources said. The sale, which will take place before the end of June, will value TSB at between 0.7 times and 0.9 times its book, or net asset value of 1.6 billion pounds ($2.7 billion), the sources said, giving it a valuation of between 1.12 billion and 1.44 billion pounds.

Lloyds is obliged by European competition regulators to sell the 631 branches which now form TSB as a condition of receiving state aid during the financial crisis five years ago and therefore must now sell the whole of TSB by the end of 2015.

The price reflects a cooling of investor interest in UK company flotations in recent weeks following a rush of activity earlier in 2014. Clothing chain Fat Face pulled its planned London listing last week while shares in insurance to holidays firm Saga have fallen below their IPO price.

Nevertheless, Saga's private equity owners are pressing ahead with plans to float its sister firm, roadside recovery services and insurance firm the AA.

And TSB's public share sales will still fetch more than Lloyds' initial plan to sell the branches to the Co-operative Bank for 750 million pounds. That deal collapsed when a 1.5 billion-pound funding gap at the Co-op emerged.

The bank already has 4.5 million customers and 6 percent of bank branches in the UK, making it Britain's seventh-largest retail bank and giving it a headstart over other new entrants.

(Reporting by Matt Scuffham; Editing by Greg Mahlich)