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Credence Independent Advisors Blog: UK Unemployment Falls To Five Year Low but Wage Growth Slows



Strong jobs growth continues as UK unemployment rate falls, but wage data show prices are rising much faster than pay packets again

Record jobs growth has pushed unemployment to a five year low, official data showed on Wednesday, although weak pay growth showed households are still feeling the squeeze on their finances, even as the economy strengthens.

The number of people in employment surged by 345,000 to a record 30.5m between February and April, according to the Office for National Statistics (ONS) . This was the biggest increase since records began in 1971, and surpassed the previous record set last month of 283,000.

Unemployment dipped by 161,000 to 2.16m, which pushed the jobless rate down to 6.6pc, from 7.2pc in the quarter to January. This represents the lowest rate of unemployment since the final quarter of 2008, when it stood at 6.4pc.



However, the data showed prices are rising faster than wages again. Average pay including bonuses grew by just 0.7pc in the three months to April, compared with 1.9pc growth in the three months to March. Between April 2013 and April 2014, the Consumer Prices Index (CPI) – the Government’s preferred measure of inflation – increased by 1.8pc.

The data were distorted by a single month drop in bonus payments of more than 25pc in April, compared with a rise of 47pc in April 2013. Last year’s figure was boosted by companies delaying bonus payments until the new tax year to help staff benefit from a cut in the top rate of income tax to 45p, from 50p.

However, pay excluding bonuses grew by just 0.9pc over the quarter, suggesting that while jobs growth remains robust, household spending power continues to be eroded by inflation.

“Britain’s jobs market is booming everywhere apart from in most people’s pay packets,” said John Philpott, director of the Jobs Economist. “Total unemployment is down sharply, while long-term unemployment has fallen below 800,000 and youth unemployment is now clearly on a sharp downward path. Yet despite all this very good news the rate of growth of average earnings has slowed.

“This is a jobs recovery like never before, loads more work but no greater reward, an economy that looks much healthier but feels little better in the workplace.”



Several forecasters, including the Bank of England and the Office for Budget Responsibility expect wages to begin outpacing inflation on a sustained basis from the second half of this year.

The rise in employment was mainly due to people being employed by companies rather than higher self-employment, with full-time employees accounting for almost two-thirds of the increase. An extra 73,000 workers registered as self employed between February and April compared with the previous quarter, although on a monthly basis, the number of self-employed workers fell to 4.37m in April, from 4.55m in March.



Experimental statistics showed the single-month jobless rate plummeted to 6.4pc in April, from 6.8pc in March. However, the data are volatile and often revised.

The continued strength of the labour market, which has seen almost 800,000 jobs created over the past year, has raised questions about how long the Bank of England can refrain from raising interest rates, as it tries to avoid derailing Britain’s nascent recovery.

Earlier this week, Ian McCafferty, an external member of the Bank’s Monetary Policy Committee (MPC) said the time to raise interest rates was “approaching”. However, he added: “There is scope for the economy to grow a little further before we really get to that point and once we get to that point … any rises in interest rates we hope will be only gradual for some time to come.”

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Credence Independent Advisors Blog - Britain’s GDP Surpasses Pre-Recession Peak



The level of UK GDP is approximately 0.2pc above where it was in January 2008, according to The National Institute of Economic and Social Research

Britain has reached the “symbolic milestone” of clawing back all the losses it suffered during the Great Recession, a leading think-tank said on Tuesday, while strong manufacturing figures added to evidence that the recovery is broadening out.

The National Institute of Economic and Social Research (NIESR) said the UK economy grew by 0.9pc cent in the three months to May, following growth of 1.1pc in the quarter to April. By this estimate, the level of UK gross domestic product (GDP) is approximately 0.2pc above its previous high-point in January 2008.


The profile of recession and recovery Graph: NIESR


Jack Meaning, a research fellow at NIESR, said “robust” growth rates over the past twelve months had bought the UK economy back to its pre-recession peak. “The growth has been reasonably broad-based. The pick-ups were initially in consumption but now there is some rebalancing towards investment activity as well,” he said.

NIESR’s analysis came as official data showed manufacturing rose at its fastest annual pace in three years in April, indicating a broadening of the expansion.

Industrial production increased by 3pc between April 2013 and April 2014, while manufacturing increased by 4.4pc over the same period, according to the Office for National Statistics (ONS). On a monthly basis, production increased by 0.4pc between March and April.

“British factories are booming,” said Chris Williamson, chief economist at Markit. “The official and survey data also help to dispel the notion that the recovery is based purely on consumer credit and the housing market, but is instead being fuelled to a large extent by booming factories and industry.”

All of the main sectors were higher than they were a year ago except for electricity, gas, steam & air conditioning, which saw a decline in output of 11.5pc.

The ONS said that warmer weather probably reduced demand for gas and electricity.

Michael Saunders, chief UK economist at Citibank, described the robust manufacturing growth as a “march of the makers”, while Martin Beck, senior economic advisor to the EY ITEM Club, said the manufacturing sector remained “the golden child of the industrial renaissance”.

Mr Beck said: “A decent expansion in manufacturing output and a continued rebalancing of the economy look set to continue.” However, he added: “One thing lacking in the official data in recent months has been overseas demand, weighed down in part by the strength of the pound.”

Analysts also said Tuesday’s data kept the UK economy on track to expand at its fastest annual rate since 2007. NIESR expects the economy to grow by 2.9pc in 2014 and 2.4pc in 2015. A separate report by the Organisation for Economic Co-operation and Development (OECD) said UK growth remained at “above trend rates” in April, suggesting that the recovery is gaining traction.

However, Mr Meaning said that compared to other major countries, the UK was one of the last to surpass pre-recession GDP levels.

“France was marginally earlier than us and America was quite a bit earlier than us. It is the Eurozone counties such as Italy, Spain and Greece that are still below pre-recession peaks,” he said. “I think this is a symbolic milestone. It may give a small confidence effect. But we really need a pick-up in other things such real wage growth, which is still at the same level as it was 2004.”

NIESR expects real wages to regain the 2009 high towards the end of 2018. It also believes GDP per capita will not recover to pre-crisis levels until 2017. Factory output also remains 7pc below its peak, in contrast to services sector output, which is already well above pre-crisis levels.

Business Secretary Vince Cable said this week that while the UK’s economic recovery is “generally a good story”, it still needs to shift towards exports.

Credence Independent Advisors Blog Investors look to China and U.S. after ECB fights deflation risk

Investors look at computer screens showing stock information at a brokerage house in Shanghai

 

(Reuters) – This week’s light calendar gives investors room to digest the European Central Bank’s radical moves to avert deflation and look beyond U.S. data which, in more normal times, might imply higher interest rates.

 

Global markets will keep an eye on China’s investment activity and industrial production, U.S. retail sales, the euro zone’s Sentix sentiment index and industrial production as well as UK unemployment figures.

 

“After all the excitement of last week, the coming week will be much calmer,” said Frederic Neum, co-head of Asian Economic Research at HSBC, referring to the ECB’s radical plans to fend off deflation and U.S. data showing employment bouncing back to its pre-recession peak in May.

 

Despite the confirmation that the world’s largest economy has bounced back from a winter chill, analysts do not expect the Federal Reserve to switch from pumping billions of dollars into the economy to raising interest rates until well into next year.

 

A major focus will be U.S. May retail sales on Thursday, expected to rise 0.6 percent on the month after slowing sharply to 0.1 percent in April from strong gains in the prior two months.

 

Friday’s producer prices data for May, a proxy for consumer inflation, will shed some light on whether a second quarter acceleration in the U.S. economy is feeding inflation.

 

Analysts are looking to China’s May industrial output measure, due on Friday, for some reassurance that the world’s second largest economy is regaining momentum. The consensus forecast is for 8.8 percent growth on the year, up from 8.7 percent.

 

“China, after all, has been the engine of global growth for the past decade, and its recent sputtering has caused jitters among investors. Soothing data from China is just what investors need at the moment,” Neum said.

 

Investors will also watch China’s urban investment data on Friday. Growth is predicted to slow to 17.1 percent year-on-year in May from 17.3 percent in April.

 

“An increasing headwind is coming from investment in real estate due to accumulated oversupply as well as manufacturing due to efforts to slash overcapacity,” UniCredit wrote in its weekly focus.

 

ECB GIVES EURO ZONE BREATHING SPACE, FOR NOW

 

The 9.5 trillion euro ($13 trillion) economy of the 18 countries sharing the euro grew much more slowly than expected at the beginning of the year and analysts warned it could slow further in the second quarter.

 

The ECB cut rates on Thursday and will pump in money in an effort to steer the bloc away from the economic quicksand of deflation, promising to do more if all this is not enough.

After the bank deployed pretty much every measure it had left, bar printing money, the question is if and when quantitative easing becomes a live possibility. There is, however, a high bar for such an action.

 

“If we see a sort of vicious circle emerge out of (low) inflation and an unanchoring of expectations and an outward shock that would create a reverse spiral, that would require a broad program of asset purchases,” ECB Vice President Vitor Constancio said on Friday.

The bloc’s retail sales data for April hit a seven-year high and investors anticipate that Thursday’s industrial production data for that month will show output returning to growth on both on a monthly and annual basis.

 

June’s reading of euro zone investor sentiment on Monday is predicted to tick up again after slipping in May from April’s three-year high.

 

CENTRAL BANK WATCH

 

Japan’s central bank holds a two-day policy review, ending June 13. It is likely to maintain its current massive monetary stimulus but stick to its upbeat view on the economy and prices.

 

Investors will scour Governor Haruhiko Kuroda’s words for clues as expectations for fresh monetary stimulus recede near-term. Policymakers and private-sector economists see the economy as able to weather temporary pain from the sales tax hike that took effect on April 1.

 

The Mansion House dinner in London, one of Britain’s biggest set-pieces of the year, will give Bank of England Governor Mark Carney a chance on Thursday to comment on how to calm housing market hot spots, notably London. The International Monetary Fund has urged Britain to cool its housing market by reining in risky mortgages.

 

The UK unemployment rate on June 11 is forecast to ease to 6.7 percent in April from 6.8 percent in March, feeding speculation about how soon interest rates will rise, while several members of the ECB’s Governing Council will be commenting on local economies and the latest policy package.

 

Iceland’s central bank announces its rate decision on Wednesday, followed by New Zealand on Thursday.

 

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Credence Independent Advisors Blog: Britain Gripped by Flotation Fever



UK set for record year for IPOs as investors search for companies to benefit from returning consumer confidence.

Britain is on track for a record year for flotation’s as companies press ahead with initial public offerings (IPOs) despite signs of investor fatigue.

So far this year, 40 companies have raised £5.7bn after the market for new shares went into overdrive following years in the doldrums, figures supplied by Thomson Reuters show.

The total for 2014 so far easily outstrips the previous £4.9bn record for the same period in 2007 and the £2.9bn equivalent in 2006, which went on to be the all-time biggest year for flotation’s.

At the previous full-year market peak in 2006, 134 companies raised £12.1bn. The total fell to £10.7bn the following year and then plunged to £505m in 2008 as the financial crisis hit its peak.

Year-to-date figures for 2014 do not include Lloyds Banking Group’s flotation of its TSB business. The bank is expected to publish the prospectus for the long-awaited IPO on Monday. The sale was forced on Lloyds by the European Union after the UK government waived competition concerns to let Lloyds rescue HBOS in early 2009.

TSB is expected to be sold below book value in an attempt to entice buyers and the sale of the first tranche of 25% of the shares is likely to value the business at between £1.12 and £1.44bn – between 0.7 and 0.9 times its book value.

Detailed figures in the prospectus are likely to show that TSB is making some of the lowest returns among high street banks and is not expected to make profits or pay dividends until 2017. The IPO comes after the collapse of a planned sale to the Co-op of the TSB branch network, as the scale of the purchaser’s troubles emerged.

TSB will be spun off with 631 branches, about 6% of the banks nationwide, while it only accounts for 4% of the current account market.

Other flotations in the pipeline include the AA, which published details of its IPO on Friday. Property website Zoopla, discount retailer B&M and easy Hotel, the budget hotel chain, are also set to list in the next few weeks, despite increasing wariness from investors swamped by new offers.

Ivor Pether, a senior fund manager at Royal London Asset Management, said: “I’ll be looking at TSB closely because it’s a forced disposal, and the market knows that Lloyds has to sell the rest by the end of 2015 so it has to be priced attractively. This IPO has to take off because if the first tranche is a flop it’s a very poor precedent for the other 75% they will be selling later on. That means we may get the IPO discount we would expect and that we haven’t been getting in a lot of other issues.”

The market was gripped by IPO fever in the first few months of this year as investors threw off years of caution in search of companies that could benefit from the recovering economy and returning consumer confidence. Retailers and online businesses were high on fund managers lists.

But after initial enthusiasm, investors have become wary of the valuations placed on companies by their sellers’, which are often private equity firms seeking to unload businesses they bought before the financial crisis.

Simon Gergel, head of UK equities at Allianz Global Investors, said: “Many of the recent IPOs have gone at a premium. I look to see a good reason to buy the business given that investors have far more information than the buyers. In most cases the vendors know the business and they pick their moment.

“You often get a lot of IPOs towards the top of the market. The valuations in many areas are looking a bit extended and investors need to be careful.”

Game, the video game retailer owned by a US hedge fund, on Friday priced its flotation at the bottom of the 200p to 212p range it had proposed to investors the day before.

Fat Face pulled its planned IPO last month after investors refused to meet the £400m-plus price demanded by the casualwear retailer’s private equity owners. Saga, the over-50s insurance and travel business, was forced to value the company at the bottom of a price range its buyout firm owners had already cut under pressure from investors.

Fund managers started driving a harder bargain after several recently listed companies’ shares fell below their IPO prices, ringing alarm bells about pricy valuations.

AO World, the online kitchen appliance and TV retailer, signaled the return of IPO fever when it floated in February. Its shares rose by more than a third on the first day of trading but the shares have been below the float price for two months.

Other high-profile floats to leave early investors short changed include retailers Pets at Home and Card Factory and online takeaway food service Just Eat.

The market picked up to £8.04bn last year, helped by the successful flotation of insurer Direct Line and the high-profile listing of Royal Mail, whose shares surged by more than a third on the first day of trading.

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Credence Independent Advisors Blog: S&P 500 nearing the 2K summit


(Reuters) – Investors have spent several months deciphering the mixed signals from the U.S. economy, and yet the S&P 500 has kept moving higher, slowly but surely, putting it just shy of the 2,000 mark.

With its Friday close, the S&P would need just a 2.5 percent gain to vault the 2K level – something most did not expect during the depths of the Great Recession.

The move has been anything but frantic. The S&P 500 has not made a 1 percent move in a single session in almost two months, and the CBOE Volatility Index, the market’s favored gauge of anxiety, fell below 11 on Friday, for its lowest close since 2007.

“That the market is going up in low volatility is good for investor sentiment,” said Doug Coté, chief market strategist at Voya Investment Management in New York.

What’s unclear is whether the market is starting to become overvalued. The forward P/E ratio of the index is now 15.8 and would rise above 16 if the index hits 2,000 and earnings estimates remain the same. However, Coté said given current low interest rates, that level would still be low.

Still, the economy notably contracted in the first quarter of this year. As always, hope of a takeoff in growth persists among equity managers, boosted on Friday by employment data showing the economy finally recouped all the jobs lost during the Great Recession. It took 77 months to do so, the longest time needed to regain jobs lost in a recession.

“The jobs report was not only strong, but also not too good, so the overheating fear is not there yet,” said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.

“It suggests we’re headed up to 2,000 (on the S&P 500) in the next weeks.”

As the market has rallied, some, including several members of the Federal Reserve, have expressed concern that investors are ignoring risks. The cost to protect against market declines, measured in the options market, has been steadily falling.

Some would call that complacency, but the lack of actual volatility is keeping option prices subdued. Realized volatility for the S&P in the last 10 days has been a bit more than 4 percent, which theoretically makes the VIX expensive, not cheap.

“A lot of people who hedged their bets by buying volatility, many did it in the 13 and 13.5 area (on the VIX), so they don’t feel a need to readjust their hedges,” said J.J. Kinahan, chief derivatives officer at TD Ameritrade in Chicago.

The round 2,000 print will scare some, while others will have no option but to buy in as they chase performance. Paulsen is expecting a slide in stocks in the second half of the year.

“But right now people are more concerned about getting in before it goes up more, rather than waiting for a correction,” he said. (Reporting by Rodrigo Campos, additional reporting by Caroline Valetkevitch; Editing by Nick Zieminski)

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Credence Independent Advisors Blog: Rescue me from my 24p-a-month annuity

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Pension savers will soon be able to take their entire fund as cash. But there will be no such freedom for those already retired – even if they have pitifully small annuities

 

Robert Parker: ‘I’ve always felt giving me 24p a month defied common sense – it is like something out of Gulliver’s Travels’

 

Robert Parker (pictured) was overjoyed when the Government said in March that it intended to allow savers to withdraw their entire pension funds as cash in retirement.

 

The former teacher, 70, has possibly the most parsimonious – and ludicrous – retirement contract in Britain. Every month he is paid just 24p by Guardian Assurance from a £300 subsidiary pension fund that was turned into an annuity a decade ago. If he could rescue the remaining cash, it would go towards helping his son-in-law, who is in remission from cancer, repair his car.

 

But Mr. Parker is one of millions of older savers who will be left the wrong side of pensions “apartheid” next year. The Coalition’s flagship reforms, which the Queen this week confirmed would be one of its last acts before the general election, will offer full discretion only to those yet to retire.

Consequently, an entire generation of pensioners will remain trapped in contracts that divide their funds into bite-sized monthly handouts.

 

Mr Parker, a Telegraph reader from Stetchworth in Cambridgeshire, said: “I’ve always felt allowing me 24p a month defied common sense – it is like something out of Gulliver’s Travels. But when I phoned after the Budget, I was told the payments were ‘set in stone’ and staff were quite dismissive. I hadn’t realised there was a caveat to the reforms, which now seem iniquitous and a gross injustice to my generation.”

 

Since the turn of the millennium, an estimated five million people have bought an annuity, which turns a pension into a guaranteed income for life. In the vast majority of cases the purchase was less a choice than an obligation, as the alternative, “income drawdown”, was deemed too risky for all but the wealthiest pensioners and withdrawals were almost always capped.

 

For some, the peace of mind from an annuity was ideal. But others, such as Mr. Parker, found the rules excessively prescriptive and leaving some savers open to exploitation. Vast numbers were directed into shoddy deals by insurers that put profit before all else. Around 150,000 people a year lost out, according to the Financial Conduct Authority, the City regulator. Tens of thousands more were sold annuities for “super-healthy” people despite suffering from illnesses that entitled them to an average of £1,350 a year extra from each £100,000.

 

Ros Altmann, a former Downing Street pension’s adviser, said: “Mr. Parker’s predicament shows how ludicrous the previous situation was. A lump sum would be far more useful than a few pence per week. It should be up to individuals to choose, rather than being forced to buy a product irrespective of its value. ”

 

Before the Budget, The Telegraph published a series of damning exposes of annuity injustices and called for reform. The work of campaigners, and the drastic fall in annuity rates from 15pc in the Nineties to 5pc today, led the Chancellor in March to propose the removal of any obligation to buy an annuity from April 2015.

 

A document introducing the Queen’s Speech, signed by David Cameron and Nick Clegg, said the move was “part of our wider mission to put power back in the hands of the people who have worked hard – trusting them to run their own lives”.

 

The Government said reform was possible because the state pension would rise to a flat-rate £155 for people who reach pensionable age from April 2016, reducing the danger of the profligate falling back on the state.

 

But existing pensioners are blocked from the new state pension. And neither will they have access to savings already used to buy annuities. The creation of pension “mega funds” that could boost returns by 50pc – another aspect of the Queen’s Speech – will also be for those still in work.

 

Annuity purchases were made irreversible because providers claimed that pooling risk and investing for the long term – both necessary to guarantee income – required lifetime commitment.

 

Steven Hynes, who is in his 60s, feels “shackled” to this discredited system. Like thousands of others, he bought an annuity in 2012 after being inundated with information claiming that the introduction of EU rules would cut male annuity rates by up to 30pc in January 2013. Yet insurers slashed rates early, locking worried savers into the lowest rates ever recorded.

 

“We were disgracefully short-sold,” Mr Hynes said. “There is no reason why people who have been given just one annual payment could not be given the opportunity to reverse their annuity agreement, with their fund debited of the payment already made.”

 

Roy Humphreys, who bought an annuity on his 65th birthday in December 2012, said: “Do I have to live with this enforced fiasco for the rest of my life? I saved hard, did the right thing for my future and lost out.”

 

Tom McPhail, head of pensions research at Hargreaves Lansdown, said there was no “political appetite” to force insurers to unwind contracts. “Politicians might try to sweet talk life companies,” he said, “but they wouldn’t go any further than that with insurers’ balance sheets under pressure following the Budget.”

 

A Treasury spokesman said the Government had offered “significant support for pensioners” by ensuring consistent annual rises to state pensions.

 

However, there is a glimmer of hope for those locked into annuities. Insurers admit they make no profit from processing small annuities. One company, Phoenix Life, set a precedent last November by allowing certain customers to cash in annuities worth less than £2,000. Two thirds took up the offer. A spokesman for the firm said: “There is no legislation to stop providers from unwinding annuities, but it is not simple and took us months of work.”

 

The Association of British Insurers said savers should contact their provider to ask about escaping contracts

 

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Credence Independent Advisors Blog: ECB set for growth-boosting interest rate cut

 

Expectations are running high that the European Central Bank (ECB) will loosen its monetary policy at its meeting on Thursday.

 

Most expect at least a cut to the benchmark interest rate, while others say the ECB will go further.

 

It is thought the ECB could introduce negative rates on deposits, in an effort to boost bank lending.

 

This would mean banks would pay to keep money at the central bank, rather than receiving interest.

 

Recent economic indicators show that the recovery in the eurozone is subdued at best.

 

On Tuesday, figures showed that inflation fell to 0.5% in May, considerably below the ECB’s goal of just below 2%.

 

This has raised the threat of deflation, in which growth essentially grinds to a halt because consumers put off spending in the belief that prices will fall further. Likewise, investors stop investing.

 

Unemployment continues to plague the eurozone. On Tuesday, a report showed that the rate for the bloc as a whole fell to 11.7% in April from 11.8% in March.

 

But many embattled economies of the eurozone still suffer with much higher rates – for example, Spain has an unemployment rate of 25.1%, while Greece’s is 26.5%.

 

Fighting talk

 

So, on Thursday, analysts say the ECB will come out fighting.

 

Howard Archer, the chief economist at IHS Global Insight, said: “The ECB hardly needs any more reason to deliver a major package of simulative measures at its June policy meeting on Thursday to counter the risk of prolonged very low inflation turning into deflation.”

 

At 0.25%, the benchmark interest rate is already low. But some economists feel the ECB will cut it again, possibly to 0.1%.

 

Monetary arsenal

 

The ECB could also use further weapons.

 

Even though interest rates are low, the commercial banks are still reluctant to pass them on to their customers, mainly because they remain cautious about lending.

 

As such, the ECB could slash the rate it pays on deposits from the banks to below zero.

 

That in effect means the banks pay the ECB for keeping their money, creating an incentive for the banks to lend that money elsewhere – ideally to businesses, so that growth can be boosted.

 

Christian Schulz at Berenberg Bank said that that, as well as a reduction in the benchmark interest rate, could prove to be a powerful cocktail that would boost bank lending.

 

“But negative deposit rates have not been used at this scale before and could have unpredictable consequences,” he added.

 

“Unchartered waters”

 

Leaning hard on the eurozone’s banks to get them to lend to businesses has not been a priority for the ECB in the past. In the summer of 2012, ECB president Mario Draghi felt that measures such as negative deposit rates were “largely unchartered waters”.

 

But for many analysts, it seems the continuing storm of economic crisis in the eurozone is now blowing the ECB ship into just such territory.

 

Source: http://credenceadvisors-blog.com/ecb-set-for-growth-boosting-interest-rate-cut

Credence Independent Advisors Blog: Lloyds Banking Group Confirms Float of TSB

 

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 (Other OTC: LDNXF – news), following publication of a prospectus mid-month.

 

On Monday, Sky News City Editor Mark Klein man 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 programmer following its taxpayer-backed bailout of more than £20bn following the global financial crisis.

 

TSB, which was launched 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.

 

Lloyd’s 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.

 

The 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 news 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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