Lloyds is still weighed down by the albatross of PPI

The pay-outs will help to support on-going efforts by the government to sell down its stake in Lloyds, which has fallen from 43 per cent at the height of the banking crisis to 15 per cent now.

The FT says the bank will pay out £535m to shareholders, effectively continuing a 75 pence-per-share dividend it reintroduced at the end of December 2014.

The bank said it is assuming that complaint volumes will significantly decrease over the next year and a half, and warned it would take an additional GBP1.0 billion provision at the end of 2015 if that decline is delayed by six months and complaints remain at levels seen in the first half of 2015.

PPI complaints against Lloyds have fallen less than expected and the total set aside by the bank in relation to the scandal has now reached £13.4bn, of which £2.2bn has yet to be spent.

CEO Antonio Horta-Osorio said in a statement: “We are disappointed to announce further provisions today, but we do so from a position of financial and capital strength”.

Unlike Royal Bank of Scotland Group Plc, which hasn’t paid a dividend since its bailout, Lloyds is still generating more capital than regulators require it to hold against assets, bolstered by lower costs and falling bad-loan charges.

The PPI charge had been widely expected. At its current share price of 85 pence this would equate to an “attractive” price-to-earnings ratio of 10.6, well below the long-term FTSE 100 average of 15.

A series of disposals by the Treasury has raised around £13bn for taxpayers.

This was despite LBG setting aside a further 1.4 billion to cover compensation to customers who were mis-sold payment protection insurance (PPI), taking the lender’s total bill to 13.4 billion including administrative costs – far higher than any other British bank caught up in the scandal.

Mr Horta-Osorio said Lloyds was on course to be fully privatised over the next year.

Details on pricing have yet to be confirmed, but any member of the general public buying shares would get exposure to a growing UK bank. Profit attributable to ordinary shareholders increased to 677 million pounds from 574 billion pounds.

Lloyds Banking Group joined the “groundhog week” for UK banks on Friday when it said above-forecast profits were slashed by compensation costs.

Meanwhile, the United Kingdom government is slowly selling down its stake after mandating an investment bank to drip shares into the market.

Of that, some £2 billion has gone on administration and a similarly large amount to claims management companies, who still account for two thirds of all claims.