Lloyds Banking Group says it could spin off some of over 600 of its branches and list them as a new British bank if an auction does not offer high enough bids.
The Daily Telegraph reports that the bank is operating “dual-track” process but that a sale is still the most likely outcome.
A Lloyds spokesman says: “We will look for a buyer, and if we need to, the initial public offering option is there.”
European regulators have ordered Lloyds to sell the branches following the government bail-out it received in the financial crisis. According to the Telegraph, the disposal could create Britain’s seventh largest bank, worth more than £3bn.
Virgin Money, NBNK and Tesco are among those expected to bid for the Lloyds branches which include LloydsTSB in Scotland, Cheltenham and Gloucester and over 250 other branches in England and Wales.