Lloyds Banking Group has reported statutory profits for the first half of 2015 of £1.2bn, up 38%.

Underlying profit increased 15% to £4.4bn, driven by increased income, flat costs and lower impairment charges.

It set aside an additional £1.4bn taken for Payment Protection Insurance (PPI) and the impact of TSB, amounting to £660 million. This brings the total PPI amount provided to £13.4bn, of which £2.2bn remains unutilised.

Lloyds said the additional provision for PPI was “disappointing,” mostly reflecting higher than expected reactive complaints with higher associated redress.

It said it remains the largest lender in the UK government’s Help to Buy scheme, lending £2.5 billion since launch.

The bank increased lending to SMEs by 5% and remains the largest net lender to SMEs under the Funding for Lending Scheme (FLS), with over £3 billion of gross FLS lending in the first half of 2015.

António Horta-Osório, group chief executive, said: “The continued improvement in financial performance and strong start to the next phase of our strategic journey in the first six months of the year position us well for the future, despite the uncertainties around the economic, regulatory, competitive and political environment.

“We believe we are well placed to become the best bank for our customers while delivering strong and sustainable returns for our shareholders and supporting the UK economic recovery.”