* Non-binding indications received by Morgan Stanley-sources
* European Union demands change of ownership by 2011
* Application for deadline extension with Brussels
(Adds application for deadline extension)
By Matthias Inverardi
DUESSELDORF, Germany, Oct 28 (Reuters) - Ailing German state-controlled lender WestLB, which has been put up for sale, has attracted the interest of several potential buyers, two people familiar with the bank said on Thursday.
Non-binding indications of interest have been handed to bankers at Morgan Stanley who have been commissioned to manage any sale.
WestLB, which is partially owned by the German state of North Rhine-Westphalia and local savings banks, has been put on the block at the request of the European Union, as a condition for EU approval of state aid granted in the financial crisis.
Brussels has demanded that the Duesseldorf-based lender, which a regional politician said is worth at least 10 billion euros ($13.9 billion), must find new owners by the end of 2011.
At the same time, WestLB is holding talks over a possible merger with Bavarian peer BayernLB.
A merger of the two lenders would create Germany's third-biggest bank by assets after Deutsche Bank and Commerzbank, overtaking troubled rival LBBW.
Separately, a finance ministry source said Germany had delivered an application by WestLB to the European Commission for more time to sell property unit Westdeutsche ImmobilienBank.
The bank is supposed to sell its WestImmo unit as a condition for winning EU approval for state aid.
WestLB asked the government to apply for a postponement with the Commission because current bids for the unit were not acceptable. The deadline is set for Dec. 31 this year.
According to financial sources, the last remaining bidders were private equity firm Apollo and Aareal Bank. ($1=.7205 Euro) (Additional reporting by Gernot Heller in Berlin, writing by Edward Taylor; Editing by Jon Loades-Carter)