Lloyds Banking Group has confirmed a decision to sell around 25% of retail lender TSB, enticing investors with the offer of free shares.
The flotation is expected next month on the London Stock Exchange, following publication of a prospectus mid-month.
On Monday, Sky News City Editor Mark Kleinman revealed details of a plan to lure investors with an offer of free shares as part of the £1.5bn initial public offering (IPO).
Shareholdings of up to £2,000 must be held for 12 months after the float to be eligible for the 5% additional free shares.
The long-awaited sale is part of a mandated divestment programme following its taxpayer-backed bailout of more than £20bn following the global financial crisis.
Lloyds CEO Antonio Horta-Osorio said TSB would offer more competitionTSB, which was relaunched as a standalone brand last autumn and operates 631 branches, has a growth strategy focusing on consumers and small business customers.
It currently employs 8,000 and is responsible for £22bn invested on behalf of 4.5 million customers.
It is marketing itself on a history dating back more than 200 years and intends to lure customers away from bigger rivals that operate risky - but profitable - investment banking arms.
TSB will be taken fully public by the end of 2015 as part of the European Commission mandate on state-aid to companies.
Lloyds still owns the Halifax and Bank of Scotland and the banking group remains 25% owned by the British taxpayer.
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."
It was originally planned to sell more than 630 TSB branches to the Co-operative Bank, until a £1.5bn capital black hole was discovered in the mutual's books.
IMF boss Christine Lagarde said the global banking sector needs to do moreThe floating bank's chief executive Paul Pester said: "Today is a significant milestone on our journey to create a major new competitive force in UK banking."
TSB - originally standing for Trustees Savings Bank - dates back to 1810 when Reverend Henry Duncan created a community-based local bank.
Meanwhile, International Monetary Fund managing director Christine Lagarde, speaking at a conference in London, said the global banking system is slowly adapting to modern realities, amid sector "push back".
She said: "We're moving forward with stronger capital lending and liquidity requirements. It should certainly make the system safer, sounder and hopefully more service-oriented.
"The bad new is that progress is still much too slow and the finish line is still too far off.
"Some of this arises for the complexity of the task at hand, yet we must acknowledge that it also stems from fierce industry 'push back' and from the fatigue that is bound to set in at this point in the race."
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