UPDATE 1-UKFI to outline bank stake sale plan Thurs-paper

* Strategy to be outlined on Thursday-report

* UKFI says no timeframe for sale of assets

(Adds UKFI denial of seven-year timeframe)

LONDON, July 5 (Reuters) - The body in charge of Britain's stakes in Lloyds Banking Group (LLOY.L: Quote, Profile, Research) and Royal Bank of Scotland Group (RBS.L: Quote, Profile, Research), will this week downplay expectations of a quick sale of the shareholdings, according to The Sunday Telegraph.

UK Financial Investments (UKFI) will say in a strategy document on Thursday that it will only begin selling its shares once market confidence has been restored, the newspaper said.

Sources close to UKFI told The Sunday Telegraph that some senior officials believed it could take seven years to sell off all of the stakes.

UKFI holds 70 percent of RBS and 43 percent of Lloyds.

The strategy document will set out options for disposing of the shareholdings, including using exchangeable bonds to place chunks of stock with institutional investors, the newspaper said.

A spokesperson for UKFI could not confirm the report would be released on Thursday -- saying only that it was due before the summer recess at the end of July.