Lloyds Banking Group recorded a pre-tax loss of £439m in the first half of the year as the bank was force to make an extra £1bn available for PPI claims.
Lloyds says it has seen a sharp increase in the volume of PPI complaints in 2012. As a result, it set aside an extra £700m for PPI misselling in the second quarter. This followed a £375m increase in PPI provision in the first quarter.
This means the PPI scandal has now cost Lloyds over £4.2bn.
Chief executive Antonio Horta-Osorio says: “To realise our full potential, we must deal with various issues from the past that continue to affect us.
“The mandated branch divestment, Verde, is a legacy issue and I’m pleased that we have come to an agreement with The Co-operative Group that will establish them as an effective competitor in the UK banking market.
“The deal provides certainty for our shareholders and I also believe that the Co-operative will be a good home for our customers and colleagues.
“Missold Payment Protection Insurance policies are an industry legacy issue but by redressing those affected quickly we continue to do the right thing for our customers. We will tackle issues from the past in a way that will, in the long run, allow us to earn back customer trust and confidence.”
In the UK, Lloyds’ life, pensions and investments business experienced a 22 per cent drop in underlying profit, from £436m in the first six months of 2011 to £338m in the first half of 2012.
Lloyds says the “subdued economic climate” caused a 2 per cent fall in UK life, pensions and investments sales, from £5.6bn in the first half of 2011 to £5.5bn this year.
The figure was dented by severe drops in protection and savings and investment sales.
UK protection sales fell from £376m to £295m, while savings and investments new business was down 48 per cent, from £633m in the first half of 2011 to £331m this year.
Corporate pension sales increased 22 per cent, from £2.3bn to £2.8bn, and individual pension sales were up by 12 per cent, from £780m to £877m.