Lloyds back in the black with £1.6bn profit

The Lloyds Banking Group has returned to profitability after posting a £1.6bn before tax profit in the first half of the year.

Lloyds has rebounded strongly from a £3.96bn loss over the same period last year, as the group was hampered by its former HBOS operations.

Total impairments, or bad loans, were significantly lower than originally envisaged, with the losses falling from £13.4bn to £6.55bn.

The group says it has made "robust gross lending" to support the UK's economic recovery, extending £14.9bn of gross new mortgages to UK homeowners and £23.7bn of committed gross lending to UK businesses.

It says continued integration between the old Lloyds TSB business and HBOS remains on schedule and the group is on track to deliver £2bn synergy run-rate by the end of 2011.

"The Group's aim is to be recognised as the UK's best financial services business and to deliver sustainable value through the cycle for our customers and shareholders," Lloyds CEO Eric Daniels says.

"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."