Lloyds said investor demand for the attractively priced offering has been strong enough to sell significantly more than the 25% originally targeted.
The 260p price is just above the mid-point of the 220-290p range being targeted. It implies a market cap of £1.3bn.
A total of 175 million TSB ordinary shares are being sold by Lloyds, representing 35% of the 500 million that will be in issue at admission.
Approximately 30% of the shares sold have been allocated to retail investors. Gross proceeds realised by Lloyds will be £455m.
Lloyds major shareholders include BlackRock, Legal & General Investment Management, Scottish Widows Investment Partnership and Aberdeen Asset Managers.
"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,” said Lloyds Group chief executive António Horta-Osório.
“The significant investor demand for shares in TSB, which reflects investors' confidence in the prospects for the business, has meant that we have been able to set the offer size at 35%,” he added.
The increased size of the deal will be a boost to Lloyds in meeting its mandate to divest all of TSB by the end of next year.