Lloyds has announced plans to float a 25% stake in its TSB business on the stock market, with small investors being offered free shares in the bank.
Investors will get one free share for every 20 shares they buy (up to the value of £2,000) and hold for a period of 12 months after the flotation.
The share sale is set to take place next month.
TSB is being floated to meet EU rules over state aid after Lloyds was bailed out by the UK taxpayer in 2008. The EU ruled that after the bailout the bank would need to shed a number of its branches. The recreation of the former bank was seen as the best solution
TSB has 631 branches and 4.5 million retail customers, making it the seventh largest retail bank in the UK.
The Co-operative Bank was on course to buy the bank, but the deal faltered when the depth of the Co-op’s own financial problems emerged.