Lloyds Banking Group PLC (LYG) brought relief to the market Thursday, saying any decisions by the European Commission over business divestments won't be material to the bank, a sign Lloyds won't have the same fate as Dutch peer ING Groep N.V. (ING).

The U.K. bank also acknowledged it is in advanced talks with the U.K. government on plans to escape an expensive asset-protection scheme, which could include raising capital through a rights issue and the use of a new instrument called contingent capital.

By avoiding the scheme, Lloyds, which became 43%-government owned following a bailout last year, would avoid seeing that stake rising to around 60%. That, in turn, would also mean the Commission's remedies would be softer.

Lloyds is among many banks in the European Union that received government help amid one of the worst financial crisis on record. In exchange for that help, they now have to fulfill requirements from the Commission, which wants to make sure aided banks aren't in competitive advantage to those that stayed independent.

In Lloyds case, the Commission has to approve both the direct aid the bank received from the U.K. and the asset-insurance program. In exchange for that approval, it is pressuring the bank to cut its market shares in business it is dominant, for competitive reasons.

"Based on the discussions to date, [Lloyds] is confident that the final terms of its [Commission-mandated] restructuring plan, including any required divestments of assets, will not have a material impact on the group," the bank said.

Analysts said the comments provide a major relief to the market, which was expecting massive changes to the bank's operations in line with those announced by ING this week.

ING was forced to sell major parts of its business to meet competition requirements.

"This basically means Lloyds structure will remain intact. They will have to cut market share in some areas, but the changes won't be anything like ING is facing," said Irfan Younus, a bank analyst at NCB Stockbrokers.

In its first statement after weeks of speculation on how it will work to avoid the government's scheme, Lloyds said it will have to pay the U.K. Treasury a fee if it doesn't participate in the Government Asset Protection Scheme.

"There can be no certainty at this stage that any alternative to the GAPS will proceed. All options remain open," the U.K. lender said.

The scheme was drawn up to ring-fence banks' bad assets, and Lloyds agreed to join in exchange for a fee and a larger government stake.

The government would insure roughly GBP260 billion in Lloyds' risky assets for a fee of GBP15.6 billion, which would be paid in the form of nonvoting shares. The bank would also be responsible for a first loss of GBP25 billion.

Since it agreed on the insurance in March, however, market conditions have improved, and in September the bank said it was considering alternatives to the expensive scheme.

Analysts speculate that it could instead add GBP25 billion in fresh capital through a GBP11 billion rights issue and other measures to avoid the plan, at least in part.

Lloyds didn't provide any figures in Thursday's statement, but it said that "any alternative proposals to GAPS would be likely to include a substantial capital raising of core Tier 1 and contingent core Tier 1 capital."

It added that options currently under consideration include a combination of a rights issue and contingent capital raising, and the exchange of existing securities. Contingent capital is a special debt instrument that would convert to equity during times of financial distress.

The capital raising is expected to be fully underwritten and will be subject to shareholder approval, Lloyds said.

The lender declined to comment further on the GAPS plan and talks with the Commission.

Citing sources, Sky News reported Thursday that Lloyds would sell its Scottish Lloyds TSB Scotland, its 164-branch Cheltenham & Gloucester unit and online operation Intelligent Finance as part of its deal with the E.U.

The bank was hard-hit by the financial crisis, especially following its acquisition in January of ailing mortgage lender HBOS PLC, which was pushed by the government.

The acquisition made Lloyds dominant in some markets in the U.K., leading the Commission to request the bank to cut market share for competitive reasons. There have been fears Lloyds would have to sell 700-branch Halifax bank, a main reason why it bought HBOS in the first place.

Lloyds also said Thursday that its trading performance "has been robust" over the past few months, without providing details.

"This, added to the fact that Lloyds' future could soon be clearer, means the worst might be over for them," an analyst said.

At 1400 GMT, Lloyds shares were up 7 pence, or 8.5%, at 87 pence. The shares had been up about 3.8% before the company's statement. Royal Bank of Scotland Ltd. (RBS), which is also under pressure from the Commission to make divestments, saw its stock jump after Lloyds' statement, gaining 3 pence, or 8.3%, at 43 pence.

Company Web site: www.lloydsbankinggroup.com

-By Patricia Kowsmann, Dow Jones Newswires. Tel +44(0)207-842-9295, patricia.kowsmann@dowjones.com