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* All top firms keen for piece of Lloyds, RBS share sell-off
* Must pitch by Monday to handle bail-out bank stake sales
* Fees likely to be skinny, maybe below 0.5 pct -bankers
* Pot may still exceed 300 mln stg over several years
* Prospect of follow-on work is big attraction
By Steve Slater and Matt Scuffham
LONDON, July 5 (Reuters) - More than a dozen top banks arefinalising plans to run a 20 billion pound ($30 billion) sharesale in part-nationalised Lloyds, one of the mostprestigious British deals in recent years, but with fees cut tothe bone.
Banks need to pitch by Monday to handle the sale of thegovernment's 39 percent shareholding in Lloyds and - later - its81 percent of Royal Bank of Scotland (RBS), UK FinancialInvestments (UKFI), which manages the government's shares, says.
UKFI will pick a shortlist, possibly about eight banks,which it can turn to at short notice, and a Lloyds sale maystart this year with as much as 5 billion pounds worth itsholding up for sale, industry and political sources say.
Bankers said all the big names from Wall Street and the Cityof London will be bidding, even though fees for government workare far less lucrative than for private firms.
"There's more honour at stake than there is money," said onesenior investment banker involved in the process.
Bidding for the work will bring some of the City's big namesup against each other: UBS's Simon Lyons and David Soanes, bothof whom are advising Co-op Bank on its 1.5 billion pound ($2.3billion)rescue plan, Credit Suisse's Ewen Stevenson andSebastian Grigg, a contemporary at Oxford University of Osborneand British Prime Minister David Cameron, Barclays's Jim Renwick- who advised RBS on its bailout, and Rupert Hume-Kendall, oneof the most prolific dealmakers at Bank of America MerrillLynch, who last year advised on a Reckitt Benckiser share sale.
Heavyweights such as HSBC CEO Stuart Gulliver,Deutsche Bank's Anshu Jain and UBS's Sergio Ermotti may alsoenter the fray.
Fees could be below the usual 0.5 percent for a governmentsale and maybe as low as 0.1-0.2 percent if the government optsto give the banks advisory roles rather than the more riskytaking on of blocks of stock to sell on, bankers said.
Finance minister George Osborne said in June that thegovernment was ready to start selling its Lloyds shares, whichare trading comfortably above the government's breakeven price,having hit a two-year high in June.
The Treasury has not yet said how it will structure thesales. It may ask a syndicate of banks to buy a block of sharesand sell them in a traditional accelerated bookbuild process,which requires the banks to take on more risk.
Alternatively, it may ask banks to play more of a marketingrole and run a roadshow to assess demand for shares, withouttaking any risk. That would enable the Treasury to pay lowerfees and vary the amount it sells depending on demand. The U.S.government used this method to exit insurer AIG, on which itmade a $22.7 billion profit after paying underwriting fees of0.5 percent, far below usual non-state fees of 2-3 percent.
The scale of the Lloyds sale means banks involved shouldstill land tens of millions of pounds: banks would earn 25million pounds if they charged 0.5 percent on the sale of 5billion pounds of shares. That is potentially 325 million pounds($490 million) in total fees - albeit maybe over a decade.
But the real prize is the prospect of follow-on work for ajob well done. Britain pumped 20 billion pounds into Lloyds and45 billion into RBS, and said it aims to get its money back.
Banks have been asked to pitch for four roles: bookrunner,co-lead manager, capital markets adviser, and financial and/orstrategic adviser. All the major banks are likely to tender,including U.S. firms JPMorgan, Bank of America MerrillLynch, Morgan Stanley, Citigroup andGoldman Sachs.
At least as many Europeans are expected to pitch, includingBarclays, Deutsche Bank, UBS,Credit Suisse, HSBC and Rothschild.
All banks declined to comment.
UBS, Credit Suisse, Deutsche Bank and JPMorgan workedclosely with the Treasury during the 2008 bailout of the banks.UBS and Bank of America are joint brokers to Lloyds and UBS andMorgan Stanley are brokers to RBS.
The Treasury has asked banks to submit fee structures in sixblocks: accelerated bookbuilds above and below 3 billion pounds,full market offers - which could include share sales to retailinvestors - of above and below 5 billion pounds andequity-linked structured product sales above and below 2billion.
It is rare any transaction exceeds 8 billion pounds, so theLloyds stake is likely to be sold in at least four tranches andRBS could take more than 10.
One of the most anticipated share sales of recent years hasshown the risk of handling a hot deal, however. When Facebook's$16 billion IPO last year flopped, the blame was pinned on theNasdaq exchange and lead underwriter Morgan Stanley.
