The extra charge pushed Lloyds, which is 40% owned by taxpayers, to a £144 million loss in the third quarter.
Stripping out the cost of PPI, though, the bank doubled its underlying profit to a better-than-expected £840 million in the three months to September 30.
The gains came after Lloyds slashed bad debts and narrowed losses from its non-core businesses.
More top news
Grant Shapps and Lord Feldman should stand down for their alleged inaction over bullying claims, father of activist who killed himself says.
Scans show there is a 90% chance Tutankhamun's tomb contains a hidden chamber - the last resting place of Queen Nefertiti.
A pregnant woman suffered broken bones and is to undergo surgery after being thrown on to the bonnet of a car in a collision.