LBG, which recently slashed 15,000 jobs as it bids to halve its international division, said its loss after tax for the six months to June compared with a net profit of £596 million in the first half of 2010.
Pre-tax profit excluding exceptional charges slid 31 percent to £1.1 billion but beat analyst expectations for £1.0 billion, according to Dow Jones Newswires. LBG was also hit my higher bad debt losses in Ireland.
"The group performed in line with our expectations in the first half of 2011 despite the ongoing challenges of economic and regulatory uncertainty, the effects of which ... are reflected in these results," LBG chief executive Antonio Horta-Osorio said in a statement.
The lender's share price slumped 2.73 percent to 37.89 pence in late morning trade on London's FTSE 100 index, which dipped 0.17 percent to 5,574.84 points.
Lloyds, 41-percent owned by the British government, was mainly hit by a one-off charge of £3.2 billion which it has set aside to compensate customers mis-sold payment protection insurance by the bank.
British banks in April lost a high court appeal against tighter regulation of PPI which provides insurance for consumers should they fail to meet repayments on a credit product such as personal loans, mortgages or payment cards.
PPI became controversial after it was revealed that numerous consumers had been sold the insurance without understanding that the cost was being added to their loan repayments. Britain has since banned simultaneous sales of PPI and credit products.
LBG on Thursday said its bad debt losses narrowed by 17 percent to £5.4 billion in the first half, although the impairment charge for Ireland increased 14 percent to £1.78 billion as a result of the country's weak property market.
Horta-Osorio, who has led LBG since March, unveiled in June plans to save the bank £1.5 billion a year, aided by the scrapping of 15,000 jobs, or 14 percent of its staff.
"We don't see that figure changing," he told a conference call with reporters on Thursday.
LBG has slashed more than 40,000 posts since 2009 as it looks to nurse its way back to health after its part-nationalisation at the height of the global financial crisis.
The bank confirmed it had received "a number of credible initial approaches" for the 632 branches it is being forced to sell by EU regulators following its £20 billion bailout, adding it was hopeful of finding a buyer by the end of 2011.
The lender, which was sunk by the ill-fated 2008 takeover of rival bank HBOS, is also cutting its international activities to 15 nations by 2014, compared with the current level of 30.
Horta-Osorio's predecessor Eric Daniels left LBG amid intense shareholder anger after he oversaw the government-brokered takeover of HBOS. A Portuguese national, Horta-Osorio formerly led Santander UK, the British arm of the Spanish banking group. For the latest updates PRESS CTR + D or visit Stock Market news Today
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