Lloyds, RBS set to miss key lending targets -paper

LONDON, May 24 (Reuters) - Britain's Royal Bank of Scotland (RBS.L: Quote, Profile, Research) and Lloyds Banking Group (LLOY.L: Quote, Profile, Research) have told the government they may miss lending targets set as a condition for receiving more state support, The Sunday Telegraph reported.

RBS declined to comment. Lloyds could not immediately be reached for comment.

RBS, 70-percent owned by the government, had been told to lend an extra 25 billion pounds ($40 billion) this year and next in an effort to inject credit back into the economy.

Lloyds, 43-percent owned by the government, had been instructed to lend 14 million.

The newspaper reported both banks have said the problem was not the supply of credit but demand from large companies.

The banks expected to meet their targets for mortgage and small business lending, but the large business targets -- thought to be 6 billion pounds for RBS and 4 billion for Lloyds -- were proving very difficult to meet, the paper said, adding the Treasury was not expected to enforce the targets. The Sunday Telegraph also reported that UBS has been appointed to assess the potential sale of stakes in the integrated finance portfolio Lloyds inherited when it took over HBOS earlier this year.

The stakes in a variety of companies, including Terence Conran's D&D restaurants and cinema chain Vue Entertainment, were accumulated by HBOS at a total cost of 1.3 billion pounds, the paper said.

Last week, Lloyds said Bank of Scotland Integrated Finance would no longer be open to new business but the group would continue to manage its existing portfolio. (Reporting by Rosalba O'Brien; Editing by Dan Lalor) ($1 = 0.6275 pound)