Lloyds posts biggest half-year profit in eight years and sets aside £700m more for PPI scandal

The results are the first since the UK Government sold off its last remaining stake in Lloyds

Lloyds also set aside a further £283m for its mistreatment of customers in mortgage arrears (Reuters)

Lloyds Banking Group has reported its largest half-year profit in eight years and raised its dividend, shrugging off an uncertain economic environment.

The high street lender, which is the UK’s biggest retail bank, said on Thursday that statutory pre-tax profit had risen 4 per cent to £2.5bn in the six months to the end of June, despite around £1bn of conduct charges, primarily relating to payment protection insurance, or PPI.

The bank said that it had set aside a further £700m to compensate people who were missold the insurance policies, even though it had previously said that it hoped it had drawn a line under the scandal.

It also said that it had set aside an additional £283m to compensate hundreds of thousands of customers who it mistreated while they were in mortgage arrears.

Some customers were mistakenly charged between 2009 and 2016 because of the way Lloyds applied policies relating to financial difficulty assessments, Sky News reported.

Affected customers would be contacted by the bank and will receive an average of £350 in repaid fees and interest, the broadcaster said.

Lloyds chief executive Antonio Horta-Osorio was largely positive about the UK economy which he said, “remains resilient following strong employment and GDP growth in recent years together with private sector deleveraging and rising house prices”.

However, he also sounded a note of caution: “Inflation is however now rising above disposable income given the recent depreciation in sterling and, while this may affect consumption going forward, the economy should benefit from rising exports and earnings from foreign assets,” he said.

The results are the first since the UK Government sold off its last remaining stake in Lloyds.

The Government had owned a stake in the bank since saving it from collapse in 2008 and had steadily been reducing that more than 40 per cent share since 2013.

On Thursday Lloyds also said that it was increasing its interim ordinary dividend of 1p per share, up 18 per cent.