Lloyds Bank shrugs off Libor fines with profit increase

Chris Ratcliffe | Bloomberg | Getty Images

Lloyds Banking Group said it will ask to restart dividend payments at a "modest" level after reporting a one-third jump in underlying profit despite another jump in the cost of compensating customers mis-sold loan insurance.

The bank, which is 25 percent-owned by the government having been rescued during the 2008 financial crisis, said it will this year ask the UK regulator for permission to restart dividend payments. The bank, historically a high dividend paying stock, has been blocked from making payouts since taking a taxpayer bailout in 2008.

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Lloyds reported an underlying profit for the six months to the end of June of 3.8 billion pounds ($6.4 billion), up 32 percent from a year ago.

Profits benefited from an increased margin and improving economic conditions, with losses from bad debts more than halving to 758 million pounds.

Its net interest margin - which is the difference between the interest the bank lends at and what it pays to savers and is a key driver of income - jumped to 2.4 percent in the first half from 2.01 percent a year ago. Lloyds said it expects the margin to rise to average 2.45 percent for 2014.

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Lloyds said it had set aside an extra 600 million pounds to compensate customers mis-sold payment protection insurance, however, taking its total bill to over 10 billion pounds.