PRESS ASSOCIATION -- Taxpayer-backed Lloyds Banking Group swung to a loss in the first half of the year after it took a £3.2 billion hit to tackle the payment protection insurance scandal.
Lloyds, which is 41% state-owned, reported a £3.3 billion pre-tax loss in the six months to June, compared to a £1.3 billion profit last year.
Stripping out the provision set aside for customers mis-sold PPI, the bank saw underlying profits plunge 31% to £1.1 billion as it struggled with the "subdued" economic climate.
Elsewhere, the bank confirmed it had received "a number of credible initial approaches" for the 632 branches it is being forced to sell by EU regulators and hopes to have a buyer by the end of the year.
Lloyds chief executive Antonio Horta-Osorio unveiled his vision for the bank in June, which included 15,000 job losses as part of a cost-cutting programme.
The group, which owns Halifax, Bank of Scotland and Cheltenham & Gloucester, is being forced to sell branches in return for the £20 billion in state aid it received following the 2008 credit crisis.
The UK's biggest lender hopes these measures will push up the bank's share price to a level at which the Government could start reducing its stake at a profit. But at 40p - a two-year low - the price is a long way off from the 63p at which the Government would break even.
Lloyds reduced its bad-debt losses by 17% to £5.4 billion as improvements in its wholesale division offset a deterioration overseas, most significantly in Ireland, where the property market continues to fall.
The decline in underlying profits is partly down to a decline in net interest margins - the gap between what a bank charges for loans and what it pays to borrow - from 2.12% to 2.07%.
Lloyds said it was on track to meet its full year target for the Project Merlin agreement with the Government, after it extended £21.2 billion of gross lending to businesses in the period, including £6.7 billion for small businesses.