Lloyds Banking Group first quarter profits rise to £2bn

Lloyds Banking Group has reported a big rise in profits for the first three months of the year.

The bank, which is 39% taxpayer-owned, reported a pre-tax profit of £2.04bn in the first quarter, up from £280m for the same period last year.

Group chief executive Antonio Horta-Osorio said the bank had made "substantial progress".

That is despite the collapse last week of a deal to sell more than 630 of its branches to the Co-op.

Lloyds still plans to go ahead with the branch sale - called Project Verde - by selling them as a stand-alone bank through a stock market listing in 2014.

Mr Horta-Osorio said profits at the bank had been driven by increased margins and a continued rapid fall in costs and impairments.

The bank said it was continuing to invest in "simple, lower-risk, customer-focused UK retail and commercial banking".

Costs fell 6% in the first quarter and Lloyds added that it expected annual costs to fall to just over £9bn for 2014.

The bank has cut thousands of jobs since it was bailed out by taxpayers following the financial crisis in 2008.

It also said impairment charges - money set aside to cover bad loans - were down by 40% compared with a year ago.

Lloyds' shares closed up 1.5%, having risen to more than 4% during the day.

The share price has risen more than 70% over the past year, but remains significantly off its pre-crisis highs, and below the level at which the government can consider selling its 39% stake back to the private sector.

In its annual results published earlier this month, the bank suggested the price must reach at least 61 pence a share before a sale could be considered. It is currently at about 55 pence.

Underlying profits, which strip out certain one-off costs and gains, were £1.5bn for the quarter.

They exclude costs related to Project Verde, as well as money set aside for possible Payment Protection Insurance (PPI) payouts.

The bank has already been forced to set aside £6.8bn as a result of the industry-wide PPI scandal, but did not announce any fresh provisions.