Lloyds Banking Group PLC may sell part of its fund management business, including a possible initial public offering of Scottish Widows, to raise cash after its bailout, two people familiar with the talks said.

Lloyds is in the early stages of assessing options for Scottish Widows, its 194-year-old money management and insurance division, said the people, who declined to be identified because the talks are private. The company may also sell Clerical Medical, a provider of investment products and pensions, the people said.

The takeover of the U.K. mortgage lender HBOS PLC, announced last September, is putting pressure on Lloyds to dispose of assets as losses from the acquisition increase. Lloyds posted a $5.3 billion first-half loss, with HBOS accounting for about 80% of its bad-loan provisions.

The company, which has yet to decide on the IPO, would keep a stake after any deal, the people added. Scottish Widows is an "integral part" of Lloyds, Chief Executive Eric Daniels said when the company reported first-half results Aug. 5.

Lloyds spokesman Mark Elliott said the company will not comment on "market rumors." A spokeswoman at U.K. Financial Investments Ltd., which manages the government's 43% stake in Lloyds, and a spokeswoman at Scottish Widows in Edinburgh declined to comment.

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