Lloyds Banking Group has reported a return to profit for the first half of the year, beating forecasts in the process.
Pre-tax profit for the six months to the end of June came in at £1.6 billion, compared with loss of £4 billion in the same period last year, a turnaround which is largely due to a drop in the amount set aside to cover bad loans. This amount fell from £13.4 billion to £6.5 billion.
Total income at Lloyds rose by almost a third, to £12.5 billion.
The bank, which is 41% owned by UK taxpayers, had said it returned to profit earlier this year, but did not disclose figures until today.
Chief executive Eric Daniels said: "The group aims to deliver sustainable value through the cycle for our customers and shareholders. The principal element of the group's strategy remains the focus on building deep, long-lasting customer relationships in all its franchises.
"We continue to support this with a focus on driving down costs and maintaining effective capital management disciplines, within a strong, prudent risk management framework. Based on our economic outlook and the current regulatory context we would expect to see a smaller, more productive balance sheet and are expecting returns on equity of more than 15% over the medium to longer term."
The news has made analysts more optimistic about the potential for taxpayers to see a profit from their investment in the bank.
Lloyds is also likely to hit its gross lending targets, set by the government as part of its bail-out conditions.
In the first half of 2010, Lloyds extended £14.9 billion of gross new mortgage lending and £23.7 billion of committed gross lending to businesses, of which £5.7 billion was to small and medium businesses.
Lloyds' strong results followed HSBC's (HSBA) announcement on Monday that first-half profits had more than doubled to £7 billion. There was also a return to profit for Northern Rock's "bad bank".