Lloyds Banking Group said CEO Antonio Horta-Osorio, who has been on sick leave, would return to his job in January and the British bank also said it had picked The Co-Operative Group as the preferred bidder for 632 branches it has to sell.

Lloyds, which is 40-percent owned by the government after a state bail-out during the 2008 credit crisis, said the 47-year old would resume his post on January 9 after independent medical advice said he had made a full recovery after being on sick leave.

However, Lloyds added it would restructure and reduce Horta-Osorio's reporting lines and give other members of his senior management team more responsibility.

The board and I are pleased that António has made a full recovery, Lloyds Chairman Sir Win Bischoff said in a statement.

We are looking forward to his return after the New Year to continue to lead the Group and build on the strong progress he has already made in transforming the business and delivering the strategic plan, added Bischoff.

Some analysts said it could take some time before Horta-Osorio regained the full trust of investors.

Only time will tell, but it does not necessarily draw a line under the issue, and the new responsibilities of other members of his management carries the risk of undermining him, said Shore Capital analyst Gary Greenwood.

Another analyst, who declined to be named, also said that the changes to Horta-Osorio's management set-up risked confusing investors.

Lloyds shocked investors last month by saying that Horta-Osorio would take a break after suffering a stress-related illness.

Lloyds, under Horta-Osorio's leadership, embarked on a restructuring that entails 15,000 job cuts and a retreat from many overseas operations. He took up the CEO role in March.

The bank has been forced to put hundreds of branches up for sale in exchange for state aid it received in the credit crisis.

The Co-Op had been in competition with new bank venture NBNK for these assets. A Reuters poll earlier had shown that the Co-Op was seen as the favourite to buy them.

Lloyds said it would now enter into more detailed and exclusive talks with the Co-Op, which runs a financial services division along with a supermarket retail arm, and would hope to agree on a deal by the end of the first quarter next year.

(Reporting by Sudip Kar-Gupta and Matt Scuffham. Editing by Paul Sandle and Jane Merriman)