Bank Lloyds is in the final stages of reviewing offers from NBNK and Co-Op for some 630 branches and may make a decision in the next week, sources with knowledge of the matter told Reuters.

Sources said Lloyds is expected to hold a board meeting on December 15 to discuss a final decision over the branch sell-off, which has the codename Project Verde.

Lloyds has been forced to sell the branches by European competition regulators to compensate for it having been bailed out by the British government during the 2008 credit crisis, which led to the state acquiring a 40 percent stake in the bank.

The auction also comes at a tricky time for Lloyds since its chief executive Antonio Horta-Osorio is on sick leave after suffering a stress-related illness.

Analysts and investors have been evenly split between what they feel will be the eventual outcome -- a sale to new bank venture NBNK, a sale to mutually-owned Co-Operative Financial Services, or a decision to spin-off the assets into a new company which would then be listed on the stock market.

The Co-Op has the advantage of having a physical banking presence on Britain's high streets and strengthened this position by acquiring Britannia building society in 2009.

NBNK does not have any physical branch network but argues it has technology systems in place and has what some analysts feel is a stronger management team, led by former Northern Rock boss Gary Hoffman and one-time Lloyd's of London insurance chairman Lord Peter Levene.

Shore Capital analyst Gary Greenwood said he felt Co-Op might be better placed to win the Verde branches.

If you were to push me on this one, I would say that the Co-Op is in a slightly better position than the other options. Politically, the Co-Op could be a better fit and could be better placed to resolve the systems integration, he said.

I don't see why an IPO (initial public offering) would get a better price than a trade sale. A demerger would not really result in creating a strong new competitor bank since it would be part of the old Lloyds.

Oriel Securities analyst Mike Trippitt felt NBNK might be better placed due to its management team, while Royal London Asset Management fund manager Jane Coffey said it was evenly split between NBNK and Co-Op.

However, the sale has been affected by the ongoing market turmoil caused by Europe's sovereign debt crisis.

Sources with knowledge of the matter have said initial bid approaches put a 1.5 billion pound price tag on the Verde assets, which is less than their full book value.

Some analysts have also expressed concerns over how NBNK and Co-Op may fund a takeover of the Lloyds branches.

NBNK will likely raise capital from equity markets. Since Co-Op does not have a stock market listing, it may have to fund the deal through a debt market issue.

Both NBNK and Co-Op have stepped up their lobbying over the Lloyds branch sale in recent weeks, with the former pledging not to cut any jobs if it buys the branches, and Co-Op arguing the benefits of its mutually owned structure.

Acquiring the Lloyds retail branches offers NBNK and Co-Op the chance to create Britain's seventh-biggest bank in one fell swoop.

Lloyd's Verde assets include 4.6 percent of personal current accounts and 5 percent of the mortgage market, contributing about 500 million pounds of pretax profit in 2008 and income of about 1.4 billion pounds.

($1 = 0.6402 British pounds)

(Reporting by Sudip Kar-Gupta)