Santander's UK head to be Lloyds CEO

Any confirmation of the report, which both Santander and Lloyds declined to comment upon, would be a surprise to investors and analysts since many had expected Lloyds to name an internal candidate as its new chief executive.

Expansion newspaper added that Ana Patricia Botin would replace Horta-Osorio as the head of Santander UK.

If Santander were to lose Horta-Osorio to Lloyds, which was part-nationalised during the credit crisis, it would represent a blow to the Spanish bank which is planning a flotation of its UK division and has been expanding aggressively in Britain.

An initial public offering of the Santander UK arm, which comprises the former Abbey and Alliance & Leicester banking brands, is expected to raise at least 3bn.

Horta-Osorio has become an increasingly high-profile figure in British banking circles, and he represented Santander at the end of last month at the Confederation of British Industry's (CBI) annual conference.

Most analysts and investors have so far been backing Lloyds to choose its new chief executive from within the group's current roster of directors. Current Lloyds chief executive Eric Daniels is due to step down in the next year.

Favourites had included Helen Weir, the current head of Lloyds' core UK retail banking division, and finance director Tim Tookey.