The lender also revealed it had set aside a further £1.4bn to pay claims for mis-sold payment protection insurance, bringing its total PPI provision to £13.4bn. The latest PPI bill follows a £117m fine handed to the bank by the regulator for its poor handling of PPI complaints.
Overall the bank reported a 38% rise in half year pre-tax profits with profits for the six months to the end of June at £1.19bn compared with £863m a year earlier.
Lloyds' chief executive Antonio Horta-Osorio said: "Today's results demonstrate the strong progress we have made in the first half of the year.
"We remain focused on our aim to become the best bank for customers and shareholders, while at the same time supporting the UK economy."
