LLOYDS Banking Group has boosted its capital position by £1.4 billion, selling a portfolio of US residential mortgage-backed securities.

Lloyds said it will make a pre-tax gain of £540 million on the securities, which it sold for a cash consideration of £3.3bn to a range of institutions, and plans to use the funds raised for "general corporate purposes".

The bonds have a book value of around £2.7bn.

The bank also said its pension fund would make a £360m pre-tax gain under the deal, which it will use to reduce the deficit in the scheme.

The deal comes as regulators in the UK apply pressure on banks to shore up capital reserves to safeguard against future crises.

Lloyds, 39% owned by UK taxpayers, inherited the bonds when it acquired HBOS (Halifax Bank of Scotland) at the height of the financial crisis.

Their disposal is being seen as a return to confidence in US residential mortgage-backed securities, the collapse of which were seen as a major contributor to the financial crash in 2008.

Lloyds said the spin-offs from the deal, spanning the gain on sale, reduction in risk weighted assets and pension deficit reduction, will boost the group's capital position.

It expects to see the group's common equity tier 1 capital ratio increase by around 47 basis points, equivalent to £1.4bn in capital.

The group's core tier 1 capital ratio is also expected to rise, by around 33 basis points (£950m capital equivalent).

Lloyds, which is laying the ground for a return to the private sector, offloaded the bonds as part of a strategy to raise capital by selling non-core assets.

It recently boosted its capital ratio by selling a 15% stake in wealth manager St James's Place, in which it inherited a 57% stake as part of the HBOS takeover. Earlier this week, it announced the sale of most of its private banking business to Union Bancaire Privee of Switzerland.

Along with Royal Bank of Scotland, it has also been given permission to boost its capital position without asking for shareholders, investors or the taxpayer for more cash.

At its annual meeting, shareholders were told prospects of returning to the private sector were improving, and that a resumption of dividends would start "as soon as possible"

Shares in Lloyds closed up 0.31p at 62.11p