Its overall results appeared pretty healthy: revenues crept up 2% to £8.97bn in the first half of this year, while pre-tax profits rose 38% to £1.2bn.
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The PPI mis-selling scandal has been estimated at costing British banks a staggering £26bn with an estimated £1.7bn going to claims management companies.
The bank announced that further to an interim dividend of 0.75p per share – totalling £335m in payments to shareholders – there is a view to increasing the dividend pay-out ratio to “at least 50% of sustainable earnings”.
Lloyds expects complaints to start to tail off but warned that if they did not it would have to add an extra £3bn to the sum by the end of next year.
The total amount now paid out by Lloyds for PPI compensation is more than £13bn.
The ongoing tsunami of compensation has prompted Lloyds’ chief executive to call for claims firms to bear the cost of processing complaints which have no underlying PPI contract attached to them.
Lloyds set aside another £1.4bn to compensate victims of the scandal, after being fined a record £117m by the Financial Conduct Authority (FCA) last month for failing to handle the complaints properly.
According to a person with knowledge of the matter cited by Bloomberg, the lender is considering buying loan books in areas such as consumer finance and credit cards, where it aims to strengthen its market position.
Lloyds Banking Group Plc is starting to look at acquisitions for the first time since it required more than 20 billion pounds ($31 billion) of state aid in the financial crisis, a person with knowledge of the matter said.
The bank said profits for the six months to the end of June were £1.19bn compared with £863m a year earlier.
A day ahead of Friday’s interims, Lloyds sold a major portfolio of unprofitable Irish commercial loans for £827m.
Lloyds’ total regulatory charges so far this year are therefore far above the £850m Barclays announced for the same goal this week, and the £459m quarterly misconduct and litigation costs RBS revealed on Thursday.
The move is expected to make the stock more attractive for a “Tell Sid” style sell-off to ordinary retail investors.
“Our goal is to manage this bank as well as possible”, Horta-Osorio said.
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“We have delivered significant improvements in both underlying and statutory profitability, while at the same time strengthening the balance sheet, improving our customers’ experiences and continuing to support and benefit from UK economic growth”, Horta-Osório said in a statement.
