Lloyds Banking Group has set aside another £1bn to cover the cost of insurance mis-selling and the treatment of mortgage customers.
Another £700m will cover payment protection insurance (PPI) claims and £283m will be used to repay about 590,000 mortgage holders.
It came as Lloyds posted half-year pre-tax profits of £2.5bn, 4% higher than last year.
The results are the first since the government sold its stake in the bank.
The repayment to mortgage customers comes after they were mistakenly charged from 2009 to 2016 after going into arrears.
The Financial Conduct Authority had been investigating the issue, concluding that the bank did not always do enough to understand customers’ circumstances.
Including the latest update from Lloyds, UK lenders have been forced to set aside more than £30bn to cover PPI compensation costs.
PPI became controversial after it was revealed that many customers had been sold it without understanding that the cost was being added to their loan repayments.
The government had been steadily offloading its Lloyds stake, resulting in about £21bn being returned to the taxpayer.
The government bailed out Lloyds following the 2008 financial crisis at a cost of about £20bn.
The government still owns 73% of Royal Bank of Scotland, which was rescued with £45.5bn of taxpayers’ cash during the crisis in the world’s biggest bank bailout.