When the financial world fell apart a few years ago -- you remember -- British banks got mauled. Barclays, Lloyds Banking Group (NYSE:LYG), Royal Bank of Scotland (NYSE:RBS), and a handful more that have since been absorbed or disbanded -- no one made it out unscathed. The problems came to a head when U.K. taxpayers were forced to bail out Lloyds and RBS. That bailout cost the U.K. an reported 23 billion pounds through the end of 2012. 

In the blitz of mergers and emergency funds, Lloyds agreed to sell off some of its branches to appease its European Union overlords. The deadline for the sale was November 2012, so naturally, it hasn't happened yet. The bank was set to close on the sale with the Co-operative Bank, but the buyer pulled out at the last minute, citing ongoing economic struggles. 

To remedy its plight, Lloyds has now decided to put its branches up for sale via an IPO, under the TSB brand, which it acquired in 1995. The collapsed sale had been predicted by many analysts, who cited the Co-operative Bank's lack of size and experience as being problematic. Indeed, the 750 million-pound sale would have more than doubled the size of its branch network.

Lloyds on the path to IPO
The IPO option requires a lot of work to be completed behind the scenes. Lloyds has to rebrand the branches over the summer, while at the same time pulling the new bank's systems apart from its own. On top of that, TSB will be subject to all the same capital requirements as other banks, and must therefore have its own capital structure built alongside Lloyds existing system. 

But the payoff could be very positive, for Lloyds. Depending on how the markets are behaving at the time of the IPO, the spin-off could generate substantially more income for Lloyds, which is reported to be short of its capital requirements. The new TSB bank will cover 5 million customers, and employ around 7,000 people between its 630 branches and at its head office operations. 

Other investment opportunities
Investors interested in getting in on the ground floor of the TSB bank would do well to keep an eye on RBS's progress as it moves to sell off some of its branches as well. Under the same regulations that forced Lloyds' hand, RBS is required to divest itself of 316 branches. 

The bank has been taking offers and is reported to have found a potential buyer in two hedge funds. A recent change in capital requirements may have made the purchase more palatable, as any new owner would need less cash to get the branches up and running as a new bank. 

That deal is still in the works, though, and if things progress quickly and smoothly at Lloyds, RBS may be tempted to make its own move into the world of IPOs. Investors in any U.K. based bank would do well to keep an eye on the sales, as any new bank would be a meaningful competitor on the high street -- the TSB bank could have as much as 5% of all U.K. checking accounts, once spun off. Suffice it to say, it's going to be a very interesting year in the U.K. banking world. 

Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.