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Lloyds Could Boldly Give Up Aid

Bank Considers Cutting U.K. Insurance and Gambling on Investor Cash Instead

LONDON -- British banking group Lloyds Banking Group PLC, buoyed by a rising stock price and slowing loan defaults, is considering backing away from a government program to guarantee its assets and would raise billions of pounds in capital to cover any losses.

If Lloyds goes ahead, it would represent a bold step by the bank's beleaguered leadership to partially extricate itself from U.K. government assistance that, just a few months ago, was seen as crucial to its survival. But it would also be a gamble that investors are ready...