INVESTMENT bank JP Morgan Cazenove has been chosen to advise the Government on the sale of its stakes in Royal Bank of Scotland and Lloyds Banking Group, owner of Bank of Scotland.

Meanwhile, securities house Investec has downgraded Edinburgh-based RBS to "hold" from "buy" following the recent surge in the bank's share price, although the stock continued its climb.

UK Financial Investments (UKFI), the body which manages the Lloyds and RBS stakes, said JP Morgan would initially work on devising strategies "for realising value for the Government's shareholdings in the banks".

UKFI also named a large number of banks as having pre-qualified for roles on any share sale such as bookrunner, co-lead manager, capital markets adviser and strategic adviser. The body will appoint banks from this list to assist in any future transaction.

Jim O'Neil, chief executive of UKFI, rescued himself from the procurement and appointments processes, as he will be joining Bank of America Merrill Lynch, which has qualified for some of the roles, later this year. The taxpayer has a 39% stake in Lloyds and 81% in RBS since 2008.

The Treasury is expected to start selling Lloyds shares before the end of September if they continue to trade above the 61.2p break-even threshold set by the Government. The taxpayer paid an average of 73.6p. Yesterday they closed at 69.25p, having fallen 0.78p, or 1.1%.

The re-privatisation of RBS is likely to take longer as it continues to restructure.

After putting on 2.7p, or 0.8%, to close at 337.1p, RBS shares have risen 15.7% since hitting 291.29p on July 12, the nadir of a slump following the announcement of chief executive Stephen Hester's exit. This surge prompted Investec to cut its stance on the stock.

Investec analyst Ian Gordon said: "We no longer regard (RBS) as absurdly cheap – just cheap, and (perhaps) for good reason."

Eighteen banks were on the list to advise on strategy, with JPMorgan joined by US rivals Goldman Sachs, Bank of America Merrill Lynch, Citigroup and Morgan Stanley. Among the others featuring are Barclays, HSBC, Rothschild, Credit Suisse, UBS and Deutsche Bank.