UPDATE 1-H&R Block exploring options for bank as Dodd-Frank squeezes

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Oct 10 (Reuters) - U.S. tax preparer H&R Block Incsaid it was exploring strategic alternatives for its bankingunit to avoid heavy costs associated with stricter supervisionunder the Dodd-Frank Act.

H&R Block, like other companies with small banking units, isunder pressure to get out of the business to escape costlyoversight by the U.S. Federal Reserve.

Among the biggest exits, MetLife Inc agreed lastyear to sell its deposit business to General Electric Capital.

H&R Block's small banking unit, HRB Bank, provides bankingservices mainly to the company's tax clients. As of July 31, ithad cash balances of $341 million.

The company, whose shares were down 4.7 percent in earlytrading, said it did not expect any material impact on itsearnings for fiscal 2013.

H&R Block is facing stiff competition in its tax preparationbusiness from do-it-yourself tax filing services such as IntuitInc's TurboTax software, and the company has been on acost cutting drive for most of this year.

It has cut jobs, shut offices and overhauled its managementto focus on its fast-growing digital tax preparation business.

The company has engaged Goldman Sachs to advise on strategicalternatives for the bank.

H&R Block shares were trading at $16.81 on the New YorkStock Exchange.

(Reporting by Sharanya Hrishikesh and Ashutosh Pandey inBangalore; Editing by Ted Kerr)

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