Lloyds Banking Group is reported to be putting together a sale of £600 million of property loans.
The sale, which has still to be finalised, would be the second big loan sell off in six months for Lloyds, and follows the £923 million loan sale to Lone Star last December.
That sale, called the Project Royal portfolio, was reported to have been agreed with Lone Star at a 40 per cent discount.
This latest sale, going under the name of Project Launcelot, will be similar to the Lone Star deal, made up of loans averaging around £4 million secured against commercial property.
Lloyds is reported to be working with adviser JP Morgan Cazenove on the sale.
The bank inherited billions in commercial property loans from Bank of Scotland following its takeover of the Edinburgh-based bank in 2008.
The combined banks, renamed Lloyds Banking Group, were estimated by Credit Suisse to have £260 billion of distressed property loans in September of 2009 – most of which had originated from HBOS.
Lloyds had to be bailed out by the taxpayer with £22.5 billion of new capital in 2009, leaving the bank 41 per cent taxpayer owned.
Then in February 2010, the bank posted a loss of £24 billion on bad loans for the 2009 year, which it blamed on reckless HBOS lending.
Lloyds still has £21 billion in non-core commercial loans to sell off.