Lloyds, the partly-state owned British bank, reported an 11 percent fall in statutory profits to £1.2 billion ($1.8 billion) for the first quarter, down 11 percent from the same time in 2014, after booking a £660 million charge on the sale of division TSB to Spain's Banco de Sabadell.
The bank is still planning to resume dividend payments this year, as previously announced -- a significant milestone in the bank's recovery from its disastrous purchase of HBOS in 2008.
Its underlying pretax profit, when items like the TSB sale are stripped out, was up 21 percent rise in the quarter, as margins improved and losses on its bad debts subsided.
Lloyds has to fully divest its TSB division of U.K.-only retail banks by the end of 2015, as a condition, imposed by the European Union, of the £20 billion bailout it received from the U.K. government at the height of the 2008 financial crisis.
Last month, Banco Sabadell, Spain's fifth-biggest bank, said it had agreed to take over TSB - which was spun off from Lloyds - in a deal which values the business at £1.7 billion.
"We have made a strong start to the next phase of our strategy to become the best bank for customers and shareholders, as we continue to support and benefit from UK economic growth," Group CEO, António Horta-Osório, said in a statement.
He has been credited with turning the bank around after it struggled in the wake of the credit crisis. Its purchase of HBOS - made at the instigation of the U.K. government - meant it was more exposed to the U.K. housing market.
"I am pleased with the continued improvement in financial strength and performance in the first quarter and expect our plan to deliver sustainable growth and improved returns," Horta-Osório added.
In its quarterly release, Lloyds said losses from bad debts fell 59 percent from the first quarter of 2014 to £177 million.
"The improvement reflects lower levels of new impairment as a result of effective risk management, the reduction in the size of the Run-off portfolio, improving economic conditions and the continued low interest rate environment," the bank said.