Lloyds Banking Group reported a pre tax loss of £3.3 billion on a statutory basis for the first six months of the year, mainly due to the cost of compensating consumers who were mis-sold Payment Protection Insurance (PPI).
The bank had announced in May that it was making provisions for £3.2 billion for compensating customers who had been sold PPI before.
However, excluding one-off expenses, the bank’s profit before tax dropped to £1.1 billion for the six months to June 30 form £1.6 billion, reported over the same period last year.
“(The) performance reflects subdued UK economy, further risk reduction and high wholesale funding costs,” the bank said in a statement.
“While this was a reduction from £1,296m profit before tax in the first half of 2010, the loss in the first half of 2011 principally reflected the PPI provision of £3,200m,” the statement added.
The banks share in the mortgage lending market was recorded at more than 20 per cent and gross mortgage lending stood at £12.9 billion.
Lloyds has undertaken a massive restructuring of business and 15,000 jobs were axed as part of a planned cost reduction programme. The government currently holds 41 per cent of share in the bank.
Following the bank’s take over of HBoS and the subsequent infusion of government bail-out money, the European Regulators had ordered it to sell 632 branches as part of the agreement.
Commenting on the bank’s H1 2011 performance, group chief executive António Horta-Osório said: “We delivered a resilient first half performance, despite the ongoing challenges of economic and regulatory uncertainty, and have made substantial progress in restructuring and de-risking the group.
“I expect the actions we are taking, as detailed in our strategic review announcement, to enable us to create a high performance organisation over time and deliver the best from our franchise for both our customers and our shareholders,” he added.