Lloyds TSB is in talks to buy Germany's Dresdner Bank to capitalise on its relatively strong position, according to a report.
The Times newspaper, without quoting sources, said plans are at an early stage and Lloyds is considering a number of options in the German market.
There has also been speculation Lloyds is interested in the German operations of US bank Citigroup.
Lloyds came out of the credit crisis in a better position than some of its peers and the report suggests its board is keen to take advantage of its strong balance sheet to acquire rival banks at a lower value.
Dresdner Bank is owned by insurer Allianz and last month the company's chief executive said it was looking into a sale.
One option could be a straight swap with Lloyds trading Scottish Widows for Dresdner, the report suggested.
Other banks are said to be interested in Dresdner, with Commerzbank and Spain's Santander rumoured to be looking at a deal.
Chief executive of Lloyds TSB, Eric Daniels, said earlier in the month that banks will be looking to snap up underperforming rivals in the current climate.
Shares in Lloyds TSB were down slightly, by 1.83 per cent, in mid-morning trading, while shares in Allianz on the Berlin Stock Exchange were holding steady.
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