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* Sale will boost bank's capital ratio
* Transaction comes as U.S. housing market recovers
* Bank continues non-core asset sales
LONDON, May 31 (Reuters) - Lloyds Banking Group hassold a portfolio of U.S. residential mortgage-backed securitiesfor 3.3 billion pounds ($5 billion), boosting the Britishlender's capital and sharpening it focus on domestic lending.
Since a 2008 bailout by the British government, which nowowns 39 percent of Lloyds, the bank has been under pressure fromlawmakers and regulators to make lending to British householdsand businesses a priority.
Lloyds said on Friday it would realise a pre-tax gain ofaround 540 million pounds from the U.S. portfolio, which wassold to a number of buyers including Goldman Sachs.
The bank said the deal was expected to increase its commonequity tier 1 capital ratio by 1.4 billion pounds and its coretier 1 capital ratio by 950 million pounds.
The sale comes as a recovery strengthens in the U.S. housingmarket, with prices posting their largest gain in March sincethe peak of a housing boom in 2006.
The bank has been exiting businesses seen as not part of itscore activities, while boosting its capital in preparation foran eventual sale of the government's stake.
Earlier this week, it said it was selling its internationalprivate banking arm to Union Bancaire Privee. It also raisedabout 500 million pounds last week by selling more of its stakein UK wealth manager St. James's Place.
The bank has sold 6.3 billion pounds of non-core assets inthe first three months of the year and expects to reducenon-core assets to below 70 billion pounds by the end of nextyear.
As part of the latest transaction, Goldman Sachs bought 170million pounds worth of the residential mortgage-backedsecurities for around 200 million pounds in cash, Lloyds said.
The Lloyds TSB Group Pension Trust also exited its share ofthe portfolio, bringing the trust a pre-tax gain of 360 millionpounds and reducing its deficit.
The bank expects to complete the transaction in the firstweek of June.
Shares in the bank were up 0.65 percent at 62.2 pence by0705 GMT.
