Lloyds Banking Group's chief executive Antonio Horta-Osorio is taking a break from his role due to illness, the part-nationalised lender said on Wednesday.

Following medical advice António Horta-Osório is taking a temporary leave of absence from his duties as group chief executive of the bank due to illness. António is expected to return to his position before the end of the year, Lloyds said in a statement.

Lloyds, which is some 40-percent owned by the government after a state-led bailout during the credit crisis, added it would discuss interim measures on who would assume Horta-Osorio's functions at a board meeting on Wednesday.

Horta-Osorio took over as CEO in March, joining from Spanish-owned rival Santander UK at the end of last year.

Since arriving at Lloyds he has quickly embarked on a restructuring programme which has entailed plans to axe some 15,000 jobs, halve Lloyds' international presence and sell off some 630 retail bank branches.

However, a source with knowledge of the matter told Reuters that Horta-Osorio's workload had brought on his illness.

He's been suffering from fatigue due to over-work, said the source.

SHARES FALL

Lloyds shares fell by 1.3 percent in early morning trade, making the stock one of worst performers on the benchmark FTSE 100 index, which was up by 0.9 percent.

Investors thought that Horta-Osorio had the right strategy to turn Lloyds around, said SVM Asset Management fund manager Colin McLean.

However, investors would be reassured if his leave proves to be only a temporary and brief one, added McLean, whose firm holds Lloyds shares.

Horta-Osorio's strategy update, announced in June, stated that he planned to have cut costs by some 1.5 billion pounds a year by 2014, and boost the bank's performance by cutting through middle management to make it more agile.

Horta-Osorio aims to cut Lloyds' international presence to fewer than 15 countries from 30 now in order to focus more on domestic retail banking, where it is market leader and has historically been far more significant than its presence overseas.

Lloyds has also said it intends to decide by the end of the year on either a sale or spin-off of the 630 branches which it has been ordered to sell by regulators as payback for a state rescue package during the credit crisis.

Britain ended up with stakes of around 40 percent in Lloyds and 83 percent in Royal Bank of Scotland after rescuing both during the original banking crisis with taxpayer bailouts, and RBS has also been told to sell off a host of assets.

(Editing by Greg Mahlich)