State-backed Lloyds Banking Group has set aside a further £1.4 billion to take its bill for the mis-selling of payment protection insurance (PPI) to £13.4 billion.
Despite announcing a 38% rise in pre-tax profits for the first half of the year, Lloyds said it was "disappointed" to confirm the extra PPI scandal provision.
Pre-tax profits rose for the first half of 2015 to £1.19 billion, providing a 0.75p dividend for shareholders that amounts to £535 million.
Today's results demonstrate the strong progress we have made in the first half of the year.
We are disappointed to announce further provisions today, but we do so from a position of financial and capital strength.
Lloyds Bank is to cut around 635 jobs in its retail and other divisions.
The cuts, part of reductions announced last October, will hit retail, commercial banking, consumer finance human resources and group operations, with 65 new roles being created.
Lloyds said compulsory redundancies would be a "last resort", but the Unite union said staff who had worked for the company's success had received "all the pain and little of the profits".
Lloyds Banking Group is committed to working through these changes with employees in a careful and sensitive way.
Where it is necessary for employees to leave the company, it will look to achieve this by offering voluntary redundancy. Compulsory redundancies will always be a last resort.
State-backed Lloyds Banking Group has reached a £117 million settlement with the Financial Conduct Authority over the way it handled complaints about payment protection insurance (PPI).
Lloyds apologised to customers affected and said £2.65 million worth of bonuses was being withheld from executives.
The group, which remains nearly 19% owned by the taxpayer after being rescued during the financial crisis, has already set aside £12 billion to cover the cost of compensating those mis-sold PPI.
The penalty to the FCA relates to the handling of complaints over the scandal during the period of March 2012 to May 2013.
The government has sold another £500m of Lloyds Banking Group shares, bringing its overall stake in the bank down to 23%, from 40% in 2009.
Together with the recent dividends payment it brings the total amount recovered for the taxpayer from Lloyds to approximately £8.5bn.
Delighted that we have raised a further £500m for the taxpayer through Lloyds share sales, taking total recovered to approximately £8.5bn
Lloyds Banking Group boss Antonio Horta-Osorio received a £11.5 million bonus for 2014, the bank has confirmed.
His bonus included more than £7 million from a long-term share-based plan linked to the bank's performance for the three years since 2012.
ITV News Business Editor Joel Hills has tweeted the breakdown of bonuses awarded to the bank's executives:
A job well done. This is how Lloyds Banking Group's executives will be rewarded. http://t.co/iOnCoKP1FB
Overall, the bank's annual bonus pool was £369.5 million, 3.6% less than the previous year.
Chancellor George Osborne has hailed the announcement of £1.8bn profits at Lloyds Banking Group as a "major milestone in the recovery of the British economy", ITV News Business Editor Joel Hills has reported.
"A major milestone in the recovery of the British economy from the Great Recession and the bank bailouts" - Chancellor on Lloyds dividend.
Lloyds also confirmed money has been set aside to cover the continuing fallout from the PPI scandal.
Lloyds makes additional provision of £700m for claims from customers mis-sold PPI. Total cost to bank (and shareholders) now £12 billion
Lloyds Banking Group will pay its first dividend to shareholders in six years - since its 2008 bailout - after reporting annual profits of £1.8 billion.
The payments to the three million shareholders will total £535 million after the fourfold rise in annual profits.
Lloyds was rescued after an input of £20 billion taxpayer funds in 2008 at the height of the financial crisis.
The Government's 40% stake has since been reduced to 24%, meaning the Treasury will receive £130 million from the company's 0.75p a share dividend payment.
The Government has netted another £500 million from the sale of shares in Lloyds Banking Group, it was revealed today.
The transactions mean the UK taxpayer now holds a 23.9% stake in the bank, compared with 40% when it was bailed out during the financial crisis.
The amount of money recovered from the bank is now just under £8 billion after the latest round of share sales was launched in December.
Can confirm today that we have raised a further £500m for the taxpayer through Lloyds share sales, taking total recovered to £7.9bn
The government is concerned banks will not honour a pledge to preserve the 'last bank in town' after Lloyds announced plans to close 150 branches and cut 9,000 jobs.
ITV News Political Correspondent Emily Morgan reports: