The tax-payer bailed out Lloyds banking group gas reported a half year loss for the first six months of 2011 of £3.25 billion.

However 3.2 billion has already been ear-marked to pay compensation to the people it had mis-sold payment protection insurance (PPI) to.

Lloyds reported that after this had been stripped out profits were £1.1 billion, which is a 31% reduction on last year’s £1.6 billion but still broadly in line with expectations.

The £3.2 billion PPI claim money that has been set aside clearly skews the numbers and is really a resetting of their figures to reflect a small portion of the profits they should not have enjoyed in previous decades.

The Group chief executive, António Horta-Osório, said in the half year report ‘We delivered a resilient first half performance, despite the ongoing challenges of economic and regulatory uncertainty, and have made substantial progress in restructuring and de-risking the Group. I expect the actions we are taking, as detailed in our Strategic Review announcement, to enable us to create a high performance organisation over time and deliver the best from our franchise for both our customers and our shareholders.’

The group also made reassuring noises over the sale of 632 of its branches forced on it after taking bail-out funds. Without naming names Mr Horta-Osório said "We can confirm we have had a number of credible approaches and they have been in line with our expectations." And added "We are confident we will find a buyer."

Overall Lloyds reports that it has managed to reduce its bad debt losses by 17% to £5.4 billion but it has seen its impairment charge for Ireland increase.

Lloyds also said that it had a total of £189 million in exposure to Spain, Italy, Portugal, Ireland, Greece and Belgium.

The group says that it expects high inflation and austerity to result in slow growth in deposits. It also says that it expects improved unemployment in the second half of the year as well as a more stable housing market leading to an interest rate rise.

But for the taxpayer the concern should be whether they ever get their money back. The share price at present is at a 2 year low of about 40p, which is far short of the 63p point where the government would break even.

Matthew Sinclair of the TaxPayers’ Alliance told Sky News that the bank was going into very uncertain economic times in a weakened state and we should be concerned about their ability to weather the storm.

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