Shares in Lloyds Banking Group PLC (LYG) sank Monday after the European Union competition commission pressured Dutch peer ING Groep N.V. (ING) to sell major parts of its business to meet state aid conditions, reviving fears that part state-owned Lloyds will be forced to make similarly hefty disposals.

At 1504 GMT, Lloyds shares were down 5 pence, or 5.1%, at 91 pence in an overall higher market.

Analysts said the drop showed how jittery investors are about the U.K. bank's future, and because the ING shake-up was much harsher than investors had anticipated.

"The ING decision tells you that we really don't know how good or bad it will be for Lloyds, and also explains why Lloyds is looking to remove itself from the (asset-protection scheme)," one banking analyst said.

Lloyds is widely expected to launch a roughly GBP25 billion capital-raising that would help it avoid subscribing to the government's asset-protection scheme - a program that would underline potential losses on a GBP260 billion book of risky loans and investments but that comes at a cost of a higher stake being held by the government.

Whether it succeeds or not in that effort, its 43% state ownership after a GBP17 billion bail-out a year ago means it will almost certainly have to make disposals or other concessions to appease the commission on its competitive position.

Lloyds controls large swathes of the U.K.'s current account, small business lending and home mortgage markets after merging with HBOS PLC in January, a move that was agreed in September 2008 as the financial system faced collapse and helped precipitate its need for a government rescue.

ING on Monday said it was spinning off its insurance and investment-management businesses and repaying half the EUR10 billion it owes the government, in a bid to assuage E.U. concerns over the state-aid package it received last year. It will also divest its ING Direct business in the U.S. and some Dutch retail banking activities by the end of 2013.

The Dutch government had injected money into ING at the height of the financial crisis and agreed to guarantee the risks on a EUR28 billion portfolio of Alt-A securities that are backed by mortgages rated between prime and subprime.

The E.U. was concerned that ING was paying too little for the state guarantee, effectively giving the company a competitive advantage.

Shares in Royal Bank of Scotland PLC (RBS), which is 70% owned by the U.K. government, also fell Monday, to 46 pence at 1504 GMT, a drop of 2 pence, or 3.2%. The bank is also expected to have to make concessions on its state aid package consisting of a GBP20 billion capital injection and a plan to have the government insure about GBP300 billion in loans. Chief Executive Stephen Hester previously said he anticipates the bank will have to cut its market share in small business lending.

Company Web site: http://www.lloydsbankinggroup.com

-By Margot Patrick, Dow Jones Newswires; +44 (0)20 7842 9451; margot.patrick@dowjones.com

(Bart Koster in Amsterdam contributed to this article.)