The Financial Times reports that the move is another example of banks utilising their balance sheet to win over advisory business.
An estimated shortfall between mortgages and customer deposits of between Â£20 billion and Â£40 billion is to be bridged by the funding, with the difference expected to be reduced to Â£20 billion by the time a sale takes place in two years.
The bank announced that Citigroup and JP Morgan were to advise on the sale and had also been earmarked as potential funding providers.
Antonio Horta-Osorio, chief executive at Lloyds, claimed there had been "considerable interest" in the sale, while another banker stated: "It's extraordinary the amount of money involved."
The Telegraph recently reported that Lloyds Action Now has involved the Bank of England in a call for compensation by shareholders of Lloyds TSB regarding the failed merger with HBOS during the economic downturn.
By Claire Archer