Lloyds Banking Group Plc Taps JPMorgan Chase (NYSE: JPM) and Citigroup (NYSE: C) For Asset Sale

JPMorgan Chase (NYSE: JPM) and Citigroup Inc. (NYSE: C) have been tapped by Lloyds Banking Group Plc to oversee the sale of six hundred branches. Lloyds, Britain’s largest mortgage lender, has been ordered by European Union regulators to dispose of the assets. The U.K. government owns 41 percent of the firm, after paying an average of 73.6 pence for its stake in the lender.

The sale is expected to raise around $3.2 billion, said a person with knowledge of the talks, who declined to be identified because the discussions are private. The firm must sell the branches by the end of 2013 to comply with EU state aid rules following its bailout.

Antonio Horta-Osorio, who recently took the reigns as Chief Executive Officer on March 1 made this an immediate priority, meeting with investment banks pitching to manage the sale within 10 days of him taking the position. Horta-Osorio said in a statement “We made the decision to accelerate the start of the sale process in order that we met the timescales agreed with the government and EU. By doing this we also bring greater certainty and clarity for our colleagues and our customers.”

Mediobanca SpA analyst Christopher Wheeler wrote in a note to clients yesterday “There should be no surprise that Lloyds CEO is pushing forward quickly to prepare the bank for the start of a sell down of the government stake. Expect a lot more activity around Lloyds in the coming months.”

According to a Sunday Times story from earlier this month, the asset sale is expected to garner significant interest with two possible suitors already identified. NBNK Investments PLC, run by Chairman Peter Levene, and the National Australia Bank Ltd may be in the running as well.

Lloyds has continued to shed assets since the financial crisis. Most notably, the firm sold its Bank of Scotland Integrated Finance investment unit, and cut more than 26,000 jobs since its rescue. In total, the bank plans to shrink its balance sheet by 200 billion pounds by 2014.

Financial institutions across the globe continue to be reshaped following the financial crisis of 2008. U.S. banks face similar scrutiny as they strive to achieve the right size, and remain attractive to investors as well. The recent announcements of increasing dividends may help in that cause, but only time will tell. The future of the banking industry may mean leaner operations and less diversification, but conceivably stronger balance sheets and more adequately prepared to endure a shock event.