UPDATE 1-Israel seeks to sell 3-5 pct stake of Leumi

* State plans to sell 10.5 pct of Leumi by year-end

* Sale to be done via block trades

(Adds details, accountant general quotes)

JERUSALEM, June 14 (Reuters) - Israel plans to sell at least 3-5 percent of Bank Leumi LUMI.TA in the near term and a total of 10.5 percent by the end of the year, Accountant General Shuki Oren said on Monday.

“It most probably will be 3-5 percent with an option to buy more,” Oren told Reuters. “If we see big demand, we can sell it all. But we don’t want to be obliged to sell 10 percent at one time.”

Israel’s Finance Ministry on Monday asked parliament’s finance committee for approval to sell its holdings in Leumi, Israel’s largest bank, which would be done through block trades using financial institutions. The banks would then sell the shares to investors in Israel and abroad.

Oren said he hoped the committee would give its nod in a few days.

“We would like to get it over as quickly as possible,” Oren said. “But it depends on market conditions.”

The state holds a controlling 11.46 percent of Leumi, which is worth about 2.5 billion shekels ($652.9 million). It intends to sell 1 percent to Leumi employees.

“We are anticipating good demand and the market is waiting (for the sale),” Oren said.

The decision to sell the shares in this format was taken after the ministry encountered difficulties in trying to sell its remaining stake to a strategic investor.

In similar fashion, the state in January sold a 5 percent stake in Israel Discount Bank DSCT.TA through Deutsche Bank, who distributed shares of Israel's third-largest bank to clients. [ID:nLDE60B0QM]

Once the stake is sold, Leumi will be without a controlling shareholder. Oren said that as a result of the sale of the state’s stake, groups will form that will try and gain control. Those groups will need to apply for a permit from the Bank of Israel to receive permission to gain control.

Leumi’s next largest shareholder is businessman Shlomo Eliahu with 9.59 percent. Eliahu has expressed his intent to form a group that would seek control of Leumi. ($1 = 3.825 shekels) (Editing by Simon Jessop)