Lloyds faces ?3bn forced disposal

Lloyds TSB may be forced to sell Abbey National's large consumer finance unit, First National, to gain clearance for the £18 billion takeover of its high street rival.

The hostile bid is being investigated by the Competition Commission after the Office of Fair Trading concluded that the takeover would restrict competition in the current account and small business markets.

Last week the Commission warned that the bid may be blocked altogether - or it could force Lloyds TSB to sell its mortgage subsidiary, Cheltenham & Gloucester, as a condition for clearing the bid.

However, it has now emerged that the Commission may also demand the disposal of First National as a remedy, according to news service ShareCall, though it is unclear whether that would be in addition to the sale of C&G. 'It's an area we are looking into, and First National is one of the options for divestment, as are other businesses such as Cheltenham & Gloucester,' said a spokeswoman.

Some analysts say Abbey's takeover could give Lloyds TSB more than 25 per cent of the consumer finance market.

The story has come to light amid rumours that Lloyds TSB may offer to sell First National as an olive branch to regulators. It could be worth up to £3bn. Prime candidates for the business would include Bank of Scotland, which aborted its own merger talks with Abbey National after Lloyds entered the fray.

First National is one of Britain's biggest consumer credit businesses, with loan assets of about £8.5bn. Its activities include mortgages, car finance and in-store credit deals for shoppers.