Lloyds Banking Group saw underlying profit soar to £1.48 billion in the first quarter of 2013, up from £497m a year earlier, as impairment charges continued to decline.
In its results for the first three months of 2013, the government-owned bank revealed that its impairment charge reduced 40% to £1 billion from £1.6 billion in the first quarter of 2012.
Total underlying income increased 3% to £4.8 billion, which includes a £394m gain relating to the sale of shares in wealth management firm St James’s Place.
Antonia Horta-Osorio, group chief executive, said: “We made substantial progress again in the first quarter.
“Underlying and statutory profits improved significantly, and our core loan book returned to growth earlier than expected.”
He added that the group continued to invest in its UK customer-focused retail and commercial banking model.
The bank reported growth of 4% in net lending to small and medium-sized enterprises (SMEs) in the past 12 months, compared to market contraction of 4%, with more than £350m committed to manufacturing in the first quarter of this year.
Lloyds experienced a setback in recent weeks after the Co-operative Bank pulled out of the purchase of some of its bank branches.
The group has confirmed that its Verde portfolio of branches will now be divested through an initial public offering (IPO).
Horta-Osorio said: “The group has already made good progress in the creation of Verde as a standalone bank with a strong management team already in place and good progress made in creating segregated IT systems on the proven Lloyds Banking Group platform.”
Lloyds also provided an update on its payment protection insurance (PPI) redress scheme and confirmed that no further provision had been set aside during the quarter.
It showed that the fall in the volume of PPI complaints was in line with expectations, with average weekly complaints now at around 15,000, down 28% on the previous quarter.
Total costs incurred through PPI stood at £586m in the first quarter, although it warned that costs in the first half of 2013 will now be higher than expected due to the acceleration of the settlement of cases which are currently with the Financial Ombudsman Service.
Lloyds has forecast a “substantially” reduced impairment charge for 2013 and now expects total costs for the year to be around £9.6 billion, down from previous guidance of £9.8 billion as a result of further cost savings.
By Ellie Duncan