The position of Lloyds Banking Group Plc chief Antonio Horta-Osorio may be decided at a board meeting on Thursday of the British lender, sources said, six weeks after the CEO went on sick leave suffering from stress.
The meeting is shaping up to be more than usually important in determining the future of the bank, as it may also decide on how best to dispose of some 630 retail branches, said the sources who had knowledge of the matter.
Lloyds declined to comment on the matter.
Lloyds, which is 40 percent owned by the British government after a bailout during the 2008 credit crisis, has to resolve the two major issues -- the sale of the branches and the fate of Horta-Osorio -- before the end of the year.
Since it shocked investors last month by saying 47-year old Horta-Osorio was taking a break after suffering a stress-related illness, the bank has been assessing whether he should return to his position, a source involved in the process has told Reuters.
However, there is a growing sense among investors and analysts that Horta-Osorio may not return to his post, even though he has the support of UKFI, the government body managing the taxpayer's stake in the bank.
Lloyds' assessment of Horta-Osorio has included meetings between him and other board members and has also entailed having an independent medical expert examining him.
Lloyds has already formed back-up plans in case he does not return. Finance Director Tim Tookey, due to move to insurer Resolution in February, has been caretaker CEO.
Last month, Lloyds also named David Roberts, a 49-year-old non-executive director and former Barclays Plc executive, as an interim CEO in the event of a delay in Horta-Osorio's return.
NBNK, CO-OP VIE FOR VERDE BRANCHES
Horta-Osorio's illness was particularly badly timed for Lloyds since the bank is close to deciding its preferred option over the sale of 630 branches -- a disposal forced on it by regulators as payback for its state-led rescue.
Lloyds is assessing three options for the deal, which it has code-named Project Verde -- a sale to new bank venture NBNK, a sale to mutually-owned Co-Op or spinning off the branches into a new entity, then listing it on the stock market.
One source involved in the process said NBNK had made a fresh bid submission to Lloyds on December 12.
The bid went in yesterday. It was a tweak to the asset package, said the source.
However, the sale has been affected by the 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.
Both NBNK and Co-Op have stepped up their lobbying over the 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.
Co-op has also highlighted that its bid for the Lloyds branches is being led at the top level of the group and its Chief Executive Peter Marks has been in regular contact with Lloyds.
Peter Marks has been talking head-to-head with Lloyds and has been down to London on a regular basis, said a source with knowledge of the matter.
Acquiring the Lloyds retail branches offers NBNK and Co-Op the chance to create Britain's seventh-biggest bank in one bold step.
Lloyd's Verde assets include 4.6 percent of personal current or checking 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.
(Editing by David Holmes)