The government has cut its stake in Lloyds to less than 15 per cent from 43 per cent.
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The CEO stressed that securing customers’ trust is a “key imperative” as UK banks continue to deal with the consequences of past misconduct.
The bank said profits for the six months to the end of June were £1.19bn compared with £863m a year earlier.
This brings the bank’s total sum reserved for PPI compensation up to £13.4bn – by far the highest for any bank in the UK.
Chief executive Antonio Horta-Osorio said: “We are disappointed to announce a further £1.4 billion of provisions today, but we do so from a position of financial and capital strength”.
But he said if they remained flat in the second half of this year it would need to add an extra £1 billion provision, adding that “a similar level of provisioning would be required for each six months of flat complaint volumes in 2016”.
But the bank, which is now 14.9% owned by the taxpayer, said its underlying business is going so well that it will in future look at paying out excess capital to shareholders through special dividends or share buybacks.
But he said he understood the “political commitment” to a wider retail offer.
The bank, which employs 7,000 staff to process PPI complaints, expects to see a significant decrease in complaints in the next 18 months.
A rough tally of the existing data suggests there could be an additional £10bn of total PPI charges left in the pipeline if “Plevin” paves the way for a new set of complaints via the Consumer Credit Act.
Lloyds trades on about 1.6 times tangible net asset value (TNAV) per share of 53.5p, Investec Securities is not impressed though.
That could make its stock more attractive to retail investors ahead of a possible sale of shares by the government next year, Horta-Osorio said.
At the half year stage, Lloyds Banking Group has set aside an additional £1.4 billion taking its total to £13.4 billion. Limits on acquisitions, imposed by European Union regulators as a result of the bank’s 2008 bailout, have been lifted after Lloyds sold TSB Banking Group Plc to comply with state-aid rules.
Lloyds paid a 0.75p a share dividend in 2014, its first shareholder return since 2008. Lloyds’s cost-income ratio was 48.3 per cent, down from 49 per cent.
A programme to drip-feed shares into the market has reduced that stake by 10 per cent so far this year, and is set to run until the close of 2015.
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Despite these payouts, the bank still increased profits by 38%.
