The firm has hired Rothschild and Bank of America Merrill Lynch to work on the sale, said Reuters, citing two people familiar with the transaction.
The sale is likely to begin shortly as the private equity firm is under pressure from upcoming European bank health tests to sell the banking business, said the report.
Potential suitors for IKB, which is currently 91.5 per cent owned by Lone Star, include BNP Paribas, Societe Generale, Santander and HSBC.
“Lone Star has shown that it is ready to exit German banking assets now,” said one of the sources.
The German government sold IKB to Lone Star for €137m after bailing it out in August 2007.
In November last year Lone Star held a $7bn final close for its latest real estate fund following a rapid fundraise.
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