Lloyds Bank readying second sale of TSB shares -sources

* Sale could come before the end of the month -sources

* Advisers making informal pitches to Lloyds -sources

* 90-day lock-up expires at Tuesday market close

* TSB IPO in June was 11 times over-subscribed (Adds comment from industry source, updated shares)

By Matt Scuffham and Freya Berry

LONDON, Sept 23 (Reuters) - Britain's Lloyds Banking Group could launch a second sale of shares in majority-owned TSB Banking Group in the next week after a lock-up period expires on Tuesday, banking sources said.

Investment banks have been making informal pitches to Lloyds for a mandate to sell the shares. With TSB about to enter a "closed" period ahead of its Oct. 24 third-quarter results, the offer could come as soon as this week, one source said, cautioning that there was no certainty on the timing of a sale.

Lloyds in June sold a 38.5 percent stake in TSB, Britain's seventh-largest lender, at 260 pence per share, valuing the business at 1.3 billion pounds ($2.1 billion). The offering was 11 times oversubscribed by investors attracting strong demand from investors in the United States as well as Britain.

Investors were attracted by an exposure to Britain's economic recovery from a bank which is untainted by issues of past misconduct. They also saw TSB as a viable challenger to Britain's 'big 4' banks - Lloyds, Royal Bank of Scotland (LSE: RBS.L - news) , Barclays (LSE: BARC.L - news) and HSBC.

"People are attracted to it because it's a pure, clean retail bank. It doesn't have any of the sins of the past or any of the potential issues that others have," one industry source told Reuters.

TSB is one of a number of British banks that have either recently listed on the stock exchange or are preparing to do so, tapping into investor appetite for new lenders aiming to challenge the established big banks.

Aldermore said on Monday that it planned to float in London next month, in a debut that could value it at up to 900 million pounds. Virgin Money, backed by entrepreneur Richard Branson, is expected to float later this year while Santander UK (part of Spain's Santander, Shawbrook and Metro Bank are also preparing for initial public offerings.

Lloyds, which is expected to sell the remaining shares in two further tranches, agreed not to sell any more shares for 90 days following the first sale. The expiry of that lock-up at Tuesday's market close leaves it with a short window, beginning on Wednesday, in which it can sell the shares ahead of its closed period ahead of results.

The shares have performed well since their debut and are trading at 281 pence, 8 percent ahead of the price of the IPO, making a sale of about half of the remaining shares feasible, the sources said.

Lloyds and its advisors had not wanted a sale of TSB shares to clash with a further sale of the government's remaining shares in Lloyds itself.

However, shares in Lloyds are trading below the price of the government's last sale in March, ruling out a further sale this month and clearing the way for Lloyds to sell shares in TSB.

Lloyds was forced by European regulators to sell the 631 branches which now form TSB as a condition of receiving state aid during the financial crisis five years ago. It must therefore now sell the whole of TSB by the end of 2015.

Any sale will be dependent on stock market conditions, the sources said, and the bank remains confident it will meet the deadline even if a second sale doesn't happen this month. (1 US dollar = 0.6102 British pound) (Editing by Carolyn Cohn, David Holmes and Clara Ferreira Marques)