Asset sales at the bank are reportedly being planned, in order to smooth the process as the two firms merge.
Lloyds TSB is looking for potential purchasers for assets held by HBOS, ahead of the two lenders' planned £12.2 billion, all-shares merger.
The move would increase the cost efficiency of the deal, which is itself likely to have a profound effect on the UK's mortgage market, as a merged firm would form by far the biggest lender in the country.
Initially, the deal was struck with government assistance in September, after HBOS suffered a collapse in investor sentiment due to its perceived balance sheet risks. In particular, experts expressed concerns about its exposure to complex financial products backed by property, whose value has been hit hard by the credit crunch.
Now, Lloyds has embarked on talks with NM Rothschild, an investment bank, to develop its strategy on what to do with equity stakes held by HBOS once the merger is complete, the Sunday Telegraph reports.
Sales of stakes held by HBOS in around 70 different firms are being targeted by Lloyds, sources told the newspaper. Relieving the pressure on the troubled bank's balance sheet through the offloading of assets would likely make the transition process of the merger smoother for both firms.
However, Lloyds might also choose to hold on to the stakes if suitable buyers cannot be found, the sources added.
The takeover is due to be completed in January 2009.
