Commercial provider Lloyds TSB is looking to sell off equity stakes currently held by HBOS, in order to smooth the passage of the two firms' merger.

Holdings in around 70 companies are being targeted for sale to investors, in order to ease pressures on HBOS' balance sheet, the Sunday Telegraph reports.

The £12.2 billion merger deal was announced in September, after HBOS faced a loss of investor confidence and its share price declined sharply.

Once it is complete, the new merged lender will be the largest in the UK.

Lloyds is understood to have entered into talks with NM Rothschild, an investment bank, over what to do with the equity stakes.

The bank might decide to hold on to the assets if no suitable buyers can be found, particularly as their value has depreciated so markedly over recent months, sources told the newspaper.

Both HBOS and Lloyds TSB are participants in the government's bank recapitalization plan.

The merger is scheduled to be completed in January