Lloyds hopes to boost its share of the high street but PPI bill still rising

However it booked a further £1.4bn for PPI taking the total provision so far to £13.4bn, of which £2.2bn has still to be used.

The total includes more than £2bn in administrative costs with 7,000 staff employed to process complaints. Lloyds has also had to go back over cases it previously rejected.

The bank stated that while complaint numbers dropped by eight per cent in the six months to June compared to the same period last year they are not going down as quickly as anticipated.

It now expects to handle total complaints over the scandal of 3.9 million, of which 700,000 are yet to be received.

Lloyds said the current provisions assume a significant decline in complaint volumes over the next 18 months.

However if that decline is delayed by six months the bank would need to take an additional provision of £1bn at the end of this year. A similar sum would also need to be set aside for each six month period of flat complaint volumes in 2016.

Mr Horta-Osorio admitted the latest provision was “disappointing” and said: “Complaints are coming down less quickly than we thought.”

The group also put aside £175m relating to packaged bank accounts – where customers pay a fee for additional benefits - but said it did not see redress from that running into significant numbers.

Finance director George Culmer pointed out less than one third of claims on packaged bank accounts are currently being upheld compared to around 78 per cent of PPI ones. The compensations sums on the accounts is also said to be much smaller than PPI, where the average payout is more £1,900.

Lloyds also noted a £660m charge relating to the disposal of its stake in TSB which Mr Horta-Osorio described as a “very costly” exercise.

On branches Mr Horta-Osorio suggested Lloyds had gained significant market share across the UK high street in the past four years as it kept sites open at a time when many rivals have been shedding retail locations.

While Lloyds will close a net 150 branches over the next three years the chief executive said that was equivalent to around two per cent of its estate.

He said: “Given the trends we saw, and what other banks have said publicly, we will continue to gain market share on branches.

“Clients still like the branches and we are the largest bank in the communities and we want to continue being the largest bank in the communities. I am very confident our market share will continue to increase.”

Mr Horta-Osorio confirmed plans to add to the three Halifax branches the group has in Scotland. Data he presented shows Lloyds has 1,296 sites, Halifax 664 and Bank of Scotland 291.

According to Lloyds that has meant it has moved from the number two position in Scotland to number one in terms of high street presence and from number three to number two across the UK.

However Mr Horta-Osorio did admit consumer behaviours were changing with growing numbers of digital and mobile customers meaning branches were being used less by some customers.

Net SME lending in the period was said to have grown five per cent to £1.5bn while it also remains the market leader in mortgage lending to first time buyers.

Mr Horta-Osorio said Lloyds was on course to be fully privatised over the next year. The Treasury's stake in the lender - rescued by the taxpayer at the height of the financial crisis - has shrunk to less than 15 per cent in recent months.

Brenda Kelly, head analyst at London Capital Group, said: “The introduction of a dividend is well timed and will make it much easier for the government stake disposal in due course. PPI claims remain a thorn in the side of the bank which has set aside a further £1.4bn for future litigation. This brings the total to £13bn, the highest of all the UK banks."