STOCKS NEWS EUROPE-Lloyds set for passive boost after Treasury sale

The British government's sale of part of its stake in Lloyds Banking Group is set to boost the UK bank's free float and its weight on equity indexes, attracting demand from passive investors which track those markets, such as exchange traded funds (ETFs).

Potential demand for Lloyds' stock will be between 820 million shares and 910 million shares, according to estimates by two large investment banks.

Lloyds is part of widely tracked indexes such as Britain's FTSE 100, the STOXX Europe 600 and the MSCI World.

Demand is estimated to be between 432 million and 475 million shares from investors tracking FTSE indexes, between 334 million and 340 million shares from those tracking MSCI (NYSE: MSCI - news) indexes and between 54 and 97 million shares from STOXX trackers.

The banks say FTSE should adjust its weightings a week after the offer settles on March 31, while MSCI and STOXX are expected to delay the adjustments until their next reviews, which are due to take place in May and June, respectively.

One of the banks cautions demand for Lloyds' stock may be lower than current estimates suggest if index trackers participate in the Treasury offering.

To read more about the UK government's sale of Lloyds' shares, please click

Reuters messaging rm://francesco.canepa.thomsonreuters.com@reuters.net