LLOYDS Banking Group has posted a half-year profits of £863m, despite setting aside another £600m to cover mis-sold payment protection insurance (PPI).

The group, which is 25 per cent owned by the taxpayer, said it improved its financial performance in the six months to June 30, with profits excluding the PPI charge up 32 oer cent to £3.8bn.

The overall profit of £863m came despite a hit of £1.1bn to cover legacy issues, including its £217m fine this week for rate-rigging.

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Its £600m increase in its provision for expected PPI costs in the second quarter brought the running total to £10.4bn, of which more than £2bn relates to anticipated administrative costs.

Chief executive Antonio Horta-Osorio said: "It has been a successful first half for the group.

"With our initial three-year strategic plan now substantially complete, we are progressing our plans for how we will take the group forward into 2015 and beyond, and take advantages of the new growth phase of the UK economy."