The Financial Times reports Lloyds is in talks with the Treasury for a revised plan to sell the branches, with a deadline extension request to be submitted to Brussels by the end of the month.
Lloyds was given four years to sell the branches, which today relaunched under the TSB brand, as part of state aid rules relating to the bank’s bailout in 2008.
If Lloyds manages to secure more time, the bank is expected to be banned from making acquisitions until it has sold the TSB business.
Lloyds had planned to sell the branches to the Co-op Bank, but the deal collapsed in April. The Co-op has since announced a £1.5bn rescue plan to shore up its finances.
The FT says Lloyds chief executive Antonio Horta-Osorio plans to float up to half of TSB midway through next year, and hopes to sell the remainder of the business by the end of 2014.
The Treasury is expected to ask the European Commission to extend the deadline to sell TSB until the end of 2015, though will make clear a sell-off is planned for much sooner.
Royal Bank of Scotland, which needs to sell 316 branches under state aid rules, expects to need another 18 months to carve out the business to be sold after Santander pulled out of a deal to buy the branches in October 2012.