EU may make Lloyds shed sixth market share -FT

LONDON, Sept 26 (Reuters) - The European Commission may reduce Lloyds Banking Group (LLOY.L) market share in Britain by one sixth as compensation for state aid it has received, the Financial Times reported.

The newspaper said in its Saturday edition that EU Competition Commissioner Neelie Kroes had yet to make a final decision on the fate of the enlarged banking group, created by its rescue of HBOS at the height of the financial crisis.

But she would insist it sell a substantial part of its retail and corporate operations. Royal Bank of Scotland (RBS.L) would be told to make disposals on a similar scale, it said.

The paper said officials in Brussels rejected reports that Lloyds would have to sell the mortgage bank Halifax to comply with the Commission rule on state aid, but added it might have to close or sell a number of its 1,000 Halifax branches.

It also said Lloyds will have to do more than shed its Cheltenham and Gloucester subsidiary, which has 164 branches.

"That is nowhere near enough -- they would have to do something else," the newspaper quoted one official as saying.

It said officials in Brussels and London had raised the prospect of forced divestments, through the sale of businesses, branches or loan books, which would reduce the bank's market share by about 5 percentage points.