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
Labour deputy defends decision to inform authorities of allegations against peer, but admits he should not have called him "close to evil".
Is another prediction from the Back To The Future universe about to come true?
To the undoubted tragedy that was the killing of Reeva Steenkamp, the South Africa judicial system has added layers of legal soap opera.