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Profits dip at Lloyds bank after private sector return

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London (AFP)

Lloyds Banking Group on Thursday revealed an 11-percent fall in first-half net profits, in its first results since the bailed-out lender returned fully to the private sector.

LBG said profit after tax dropped to £1.6 billion ($2.1 billion, 1.8 billion euros) in the first six months of 2017 compared with the equivalent period one year earlier.

The bank was forced to set aside yet more substantial amounts of money to compensate customers mis-sold a controversial insurance product, it said in an earnings statement.

The bank said a further £700 million would be needed to compensate for payment protection insurance, bringing the total to more than £18 billion -- far in excess of other British banks caught up in the long-running scandal.

In 2011, British banks lost a high court appeal against tighter regulation of PPI, which provides insurance for consumers should they fail to meet repayments on a credit product such as consumer loans, mortgages or payment cards.

PPI became controversial after it was revealed that many customers had been sold it without understanding that the cost was being added to their loan repayments. British authorities subsequently banned simultaneous sales of PPI and credit products.

Including the latest update from LBG, British lenders have been forced to set aside more than £30 billion to cover PPI compensation costs.

Lloyds, bailed out by the UK government at the height of the financial crisis almost a decade ago, meanwhile returned to full private ownership in May.

The government had been steadily offloading its stake as LBG recovered in recent times, resulting in about £21 billion being returned to the taxpayer.

The British government bailed out Lloyds following the 2008 world financial crisis at a cost of about £20 billion, handing the state a 43-percent stake in the bank.

The government still owns 73 percent of Royal Bank of Scotland, which was rescued with £45.5 billion of taxpayers' cash during the crisis in the world's biggest bank bailout.

Lloyds is meanwhile cutting 3,000 jobs this year, bringing to 12,000 the number of positions it has decided to axe since 2014, while -- in a sign of its turnaround -- the bank bought Bank of America's UK credit card division MBNA for £1.9 billion in December.

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