Lloyds Banking Group has dismissed suggestions that chief executive Eric Daniels is threatening to quit.

A report this morning claimed Daniels was so angered by negotiations with the Treasury over the terms for the deal to insure the bank's toxic assets that he had threatened to walk out.

The City is increasingly anxious to see the results of the talks, which were expected to be unveiled last Friday.

Investors are nervous that the deal will result in the Government's stake in Lloyds, which now owns HBOS, passing 50%.

Daniel is desperate to avoid this - he and his team are said to have stormed out of meetings with Treasury officials in recent days.

Lloyds is 43% state owned. A move to convert £4 billion of preference shares held by the Government into ordinary equity would take that beyond 50%, giving Daniels less say in the running of the bank.

A spokesman downplayed talk of a fallout with the Treasury, pointing out that the issue was complex and shareholders would expect a commercial organisation to fight its corner.

The shares slumped 8% yesterday as part of a wider market fall.

Today they edged up 0.7p to 46.2p.

Lloyds is desperate to distance itself in public perception from Royal Bank of Scotland, which is likely to end up being 90% owned by the Government.