UPDATE 1-Lloyds sells $5 bln U.S. mortgage portfolio
* Sale will boost bank's capital ratio
* Transaction comes as U.S. housing market recovers
* Bank continues non-core asset sales
LONDON, May 31 (Reuters) - Lloyds Banking Group has sold a portfolio of U.S. residential mortgage-backed securities for 3.3 billion pounds ($5 billion), boosting the British lender's capital and sharpening it focus on domestic lending.
Since a 2008 bailout by the British government, which now owns 39 percent of Lloyds, the bank has been under pressure from lawmakers and regulators to make lending to British households and businesses a priority.
Lloyds said on Friday it would realise a pre-tax gain of around 540 million pounds from the U.S. portfolio, which was sold to a number of buyers including Goldman Sachs.
The bank said the deal was expected to increase its common equity tier 1 capital ratio by 1.4 billion pounds and its core tier 1 capital ratio by 950 million pounds.
The sale comes as a recovery strengthens in the U.S. housing market, with prices posting their largest gain in March since the peak of a housing boom in 2006.
The bank has been exiting businesses seen as not part of its core activities, while boosting its capital in preparation for an eventual sale of the government's stake.
Earlier this week, it said it was selling its international private banking arm to Union Bancaire Privee. It also raised about 500 million pounds last week by selling more of its stake in UK wealth manager St. James's Place.
The bank has sold 6.3 billion pounds of non-core assets in the first three months of the year and expects to reduce non-core assets to below 70 billion pounds by the end of next year.
As part of the latest transaction, Goldman Sachs bought 170 million pounds worth of the residential mortgage-backed securities for around 200 million pounds in cash, Lloyds said.
The Lloyds TSB Group Pension Trust also exited its share of the portfolio, bringing the trust a pre-tax gain of 360 million pounds and reducing its deficit.
The bank expects to complete the transaction in the first week of June.
Shares in the bank were up 0.65 percent at 62.2 pence by 0705 GMT.
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