UK Financial Investments, which manages the government’s 43.5 per cent stake in Lloyds Banking Group and 70 per cent stake in Royal Bank of Scotland, the parent of private bank Coutts, could start the process of selling tranches in both banks within a year, according to people briefed on the organisation’s plans.

On Monday Lloyds launched an open offer to replace £4 billion of preference shares held by the government with new ordinary shares. The move followed the weekend announcement of the planned departure of Sir Victor Blank as Lloyds chairman amid investor unrest over his role in the bank’s much-criticised takeover of Halifax Bank of Scotland last year.

The bank’s chief executive, Eric Daniels, has also come under fire from some shareholders but Mr Daniels has the full backing of UK Financial Investments, which manages the government’s investments in financial institutions, and some institutional investors, who see him as the right man to implement the complex integration of the troubled HBOS.

UKFI has already had substantial contact with potential investors, including UK institutions and foreign organisations such as sovereign wealth funds, to gauge their interest.

“A lot of people around the world think once you get through the losses the earnings power of these banks will be formidable,” one person familiar with the situation was quoted as saying.

The organisation is likely to exit its stakes in tranches over a period of time although “these might be quite large dribs and drabs”, people close to the matter told the paper.