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(Repeats Feb. 20 story)
* Lloyds set to announce first dividend since financialcrisis
* Payout could enable sale of chunk of shares later in year
* RBS sale seen as unlikely in next 18 months -sources
By Matt Scuffham
LONDON, Feb 20 (Reuters) - Lloyds Banking Group's anticipated return to dividends this week for the first timesince the financial crisis will help ease the way for thegovernment to sell its remaining shares in the bank, industrysources said.
Lloyds is expected to confirm it has been cleared byBritain's financial regulator to pay a modest dividend for the2014 financial year when it reports full-year results on Friday. Analysts expect a payout of about 1 pence per share,according to Thomson Reuters data.
Lloyds declined to comment.
The dividend, which will be the first since Lloyds wasrescued at a cost of 20 billion pounds ($30.75 billion) toBritish taxpayers during the financial crisis of 2007 to 2009,is seen as a key milestone in the bank's recovery.
Industry sources say it could enable UK FinancialInvestments (UKFI) - which manages the government's shares inbailed out banks - to sell another chunk of shares toinstitutions such as pension funds and insurers and possibly toretail investors later this year.
Restarting dividends will make the shares more attractiveand offering shares to retail investors would enable thegovernment to sell more and give taxpayers the opportunity tobenefit from the bank's recovery.
Before the financial crisis Lloyds had a record of being oneof the highest dividend paying stocks in Britain, handing overhalf its profit to shareholders in 2005 and 2006 and analystssay it could eventually pay out that much again.
In contrast the government is unlikely to start selling its79 percent stake in Royal Bank of Scotland in the next18 months, the sources said.
RBS is still facing a number of investigations into pastmisconduct and is working through a restructuring which includesshrinking its investment activities and international operationsto focus on lending to British households and businesses.
Reuters reported on Friday that RBS is likely to write downthe value of its U.S. bank Citizens by about 4 billion poundsnext week, potentially wiping out much of its annual profit.
UKFI raised 7.4 billion pounds through two sales of Lloydsshares to institutions in September 2013 and March 2014, takingits stake to below 25 percent from 39 percent.
In December, it appointed Morgan Stanley to gradually sellshares in the open market but progress has been slow.
Lloyds and UKFI have yet to disclose how many shares havebeen sold using that method. Under stock exchange rules, theywould have had to if the government's stake had fallen below 24percent.
Lloyds is expected to report a pretax profit before one-offitems of 7.5 billion pounds, up from 6.2 billion the yearbefore, according to a Thomson Reuters poll of 17 analysts.
RBS is expected to report this week a pretax profit of 4.1million pounds, according to the average forecast from a poll ofsix analysts by Reuters. ($1 = 0.6504 pounds) (Editing by Susan Thomas)
