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
Low pressure remaining in control gives more unsettled weather for the UK this weekend.
Charlie Gard, the baby boy whose fight for life captured the attention of the world has died, his family has confirmed.
A Royal Marine who lived a "dangerous double life" as a terrorist bomb-maker claims he faked Irish Republican sympathies out of fear.