The flotation, which commences today, will now see Lloyds sell a 38.5% stake in the bank, up from the 27.5% stake it had initially planned to float.

The sale values TSB at £1.3bn, with shares priced at 260p. The stock subsequently jumped in early trading, with shares up 11% at 290p apiece shortly after the open.

Paul Pester, CEO of TSB Bank, said: “I am delighted with the level of investor demand for TSB’s shares – especially amongst retail investors, who make up approximately 30 per cent of the IPO allocation.”

It is thought that appetite for the sale has been aided by comments from Bank of England Governor Mark Carney on interest rates.

Carney said last week that interest rates could rise sooner than expected, a factor which would aid TSB, whose mortgage book is skewed towards variable-rate loans – which would ultimately be refinanced at higher rates once the base rate rises.

Lloyds must sell the whole of TSB by the end of 2015 as part of European state aid rules agreed to as part of its 2009 bailout by the government.