Lloyds Banking Group (Lloyds) has posted a pre-tax loss of £570m ($864m) for 2012, an improvement from a loss of £3.5bn in the previous year.

Lloyds, 40% owned by the taxpayer, has been hard hit by the PPI mis-selling scandal and has set aside provisions of £3.6bn.

In the fourth quarter of 2012 the bank ear-marked £1.5bn to cover PPI claims and related charges.

The group was further hampered by a £310m charge in the fourth quarter for mis-selling of interest rate-hedging products to small and medium-sized businesses, bringing the total 2012 charge for this issue to £400m.

Total assets at the group fell by 5% to £924m from £970m in 2011.

Net interest income fell 15% across the group to £10.2bn for 2012 from £12.2bn in the previous year.

More positive metrics at the bank include:

– Underlying profit of £2.61bn in 2012, up 309% from £638m in 2011;
– Full year group net interest margin of 1.93%;
– Loan to deposit ratio fell to 121%, a fall of 14 percentage points from 2011;

António Horta-Osório, group chief executive, said: "The substantial progress we made in 2012 means that we are now ahead of our plan to transform the Group, and this was reflected in our stronger underlying financial performance in the year.

"Since setting out our strategy in June 2011, we have significantly strengthened the balance sheet, and substantially improved efficiency and focus, while continuing to work through legacy issues."

Lloyds’ agreement to sell over 600 of its branches to The Co-op Bank was put under pressure this week after The Co-op’s capital deficit was reported to be as high as £1bn by the Financial Services Authority.


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