Efforts by Lloyds Banking Group to stay out of Government control continued yesterday as it confirmed talks to sell its small Bank of Scotland Portfolio Management Service business, but it remains unclear what state support it will receive if it seeks to undertake a rights issue.

Lloyds confirmed yesterday it is in talks with wealth manager Rathbone Brothers over the sale of “non-core” wealth management businesses, including the Bank of Scotland operation that runs investment portfolios for wealthy customers.

It is a small part of Lloyds with less than £1bn under management and a few thousand customers.

The majority of the bank’s portfolio managers have anticipated the sale with eight jumping ship to the Edinburgh office of rival wealth manager Rensburg Sheppards, it was announced yesterday.

According to Lloyds’s website this leaves just four remaining, although the bank couldn’t confirm this figure.

If a deal is signed, all current customers of the service will have their portfolios run in the future by Rathbone. Bank of Scotland’s private banking customers will be referred on to the firm if they require discretionary portfolios.

Bank of Scotland Portfolio Management Service was established in 1967.

A new management team under David Vallery was brought in in March 2007 with a five-year business plan aiming to double client numbers.

The news of the sales discussions comes just days after Lloyds said it is in talks to sell more than 200 Halifax estate agent branches south of the border. The scaling back of Lloyds’ unwanted assets is viewed in the City as the start of efforts to raise capital and reduce or even end its participation in the Government’s asset protection scheme.

Under current plans, Lloyds – 43.4% owned by the Government – would put £260bn of its hardest-hit investments in the scheme but in return would cede more of the company’s equity, potentially

leaving it majority owned by the state. Lloyds has said it is looking at alternatives.

“Discussions are ongoing,” the Treasury said. “Any final agreement will have to be in the best interests of taxpayers and the stability of the financial system.”

It was reported yesterday that the Treasury is willing to commit £5bn in extra capital to the company.

The bank has already received £17bn in taxpayers’ funds – of which it has repaid £3bn – but requires £25bn to escape the toxic asset insurance scheme.

However, it is thought the government is unwilling to underwrite a rights issue, likely to be around £10bn, by the bank.

The remainder would come from debt restructuring and sale of assets.

Meanwhile, Belgium’s RHJ International is to buy UK wealth management unit Kleinwort Benson from Commerzbank.

The deal will secure RHJ £5.4bn of assets and a well-known City name.

Leonhard Fischer, chief executive of RHJI, said: “This is an important strategic investment for RHJI in a very attractive market sector. Furthermore RHJI plans to adopt Kleinwort Benson as an overarching brand for its financial services businesses going forward.”

Lloyds’s shares closed down 1.65p or 1.8% at 91.41p.