State-owned Lloyds Banking Group finally returns TSB to the stock …

The flotation will be sweetened by a pledge to ordinary retail investors that they will receive one free share for every 20 they hold on to for a year, up to the value of £2,000.

Lloyds is selling approximately a quarter of the business and up to a fifth of that is expected to be purchased by retail investors.

TSB, which can trace its history back more than 200 years, was first floated in 1986 and merged with Lloyds in 1995.

The Treasury still owns 25 per cent of Lloyds after taxpayers rescued the floundering banking group during the financial crisis.

As a result of the bailout the group was forced to sell hundreds of branches.

The TSB brand was revived last September after the collapse of a deal to sell it to the Co-operative.

Former Virgin Money chief Paul Pester has now taken control of the bank.

TSB is now the seventh largest UK high street bank and Mr Pester said it plans to explained its balance sheet by half with wider mortgage lending and further extension into the current account market.

He warned, however, that there would be no “significant dividend” for shareholders until 2017.

Mr Pester said: “Today is a significant milestone on our journey to create a major new competitive force in UK banking.”

Lloyds chief executive Antonio Horta-Osorio said: “The decision to proceed with an initial public offering of TSB is an important further step for the group as we act to meet our commitments to the European Commission.

“TSB has a national network of branches, a strong balance sheet and significant economic protection against legacy issues.

“It is already operating on the UK high street and is proving to be a strong and effective challenger, further enhancing competition in the UK banking sector.”

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State-owned Lloyds Banking Group finally returns TSB to the stock …