TSB Banking Group Plc surged as much as 13 percent in its first day of trading as Lloyds Banking Group Plc (LLOY) sold a 35 percent stake in the lender, more than initially planned, in an initial public offering.

TSB shares, which were priced at 260 pence in the IPO, rose as high as 292.75 pence and were 10 percent higher at 286.75 pence at 8:15 a.m. local time, valuing the London-based lender at 1.44 billion pounds ($2.5 billion).

The offering priced TSB at 1.3 billion pounds, less than its 1.5 billion-pound book value. Lloyds has to sell TSB to satisfy regulators after receiving a government bailout of more than 20 billion pounds during the financial crisis. The IPO is the biggest by one of the so-called challenger banks seeking to compete with Britain’s four biggest lenders.

“The successful initial public offering of TSB is an important further step for Lloyds Banking Group as we act to meet our commitments to the European Commission,” Lloyds Chief Executive Officer Antonio Horta-Osorio said in the statement.

Lloyds, the U.K.’s biggest mortgage lender, is selling 175 million TSB shares, or 35 percent of the company, raising 455 million pounds. That’s more than the 25 percent originally planned, “due to significant investor demand,” Lloyds said in a statement today.

London-based TSB, led by Chief Executive Officer Paul Pester, has about 4.2 percent of the U.K. checking account market and 631 branches.

The IPO price was in the top half of the 220 pence to 290 pence range that Lloyds announced June 9. Citigroup Inc., JPMorgan Chase & Co. and UBS AG are managing the sale. Lloyds said individual investors are buying about 30 percent of the shares.

Lloyds, 25 percent owned by the British taxpayer, has until the end of 2015 to dispose of TSB. U.K. regulators and politicians are seeking to increase competition in Britain’s consumer-banking market, which is dominated by Lloyds, Royal Bank of Scotland Group Plc, Barclays Plc and HSBC Holdings Plc.

(Source: Bloomberg)