Lloyds comes under pressure to sell Widows

SHAREHOLDERS in Lloyds Banking Group are pressing it to sell off its Scottish Widows insurance business as new rules on capital levels come into force.

It is estimated the sale could fetch about 7 billion.

Investors believe Lloyds' ownership of the insurance group will prove too expensive as the Basel Committee on Banking Regulation bans the use of capital held in insurance subsidiaries as "common capital". As a result, the Basel III regime, which comes into force in 2012-13, could drive the bank's core tier 1 capital ratio - a key measure of financial health - below industry norms.

Analysts speculate that potential buyers of the group include Clive Cowdery's Resolution, which recently acquired Axa's UK life arm in a 2.75bn deal.

Lloyds' core tier 1 ratio was 8.1 per cent at the end of last year. Andrew Lim, an analyst with Matrix Corporate Capital warned it could fall to 6.8 per cent under Basel III, which could lead to a sell off of Widows.

In a note to shareholders, Matrix said: "Lloyds fares quite badly under the proposed Basel III regulations … with its core tier 1 ratio suffering considerably."

But other analysts argue that Lloyds is in a good position to generate more capital as it benefits from economic recovery.

A spokesman for the bank yesterday said it did not comment on speculation.

l Lloyds also said it has appointed a new group communications director, Brigitte Trafford, who is a former ITV communications chief.