Lloyds Banking Group recorded a £439m loss after putting aside over £1bn for PPI redress during 2012, according to its half-yearly results out today.
PPI redress consists of £375m in the first quarter of 2012 and a further £700m in the second quarter. Lloyds said the total costs for redress now stand at £4.2bn.
Lloyds was the biggest provider of PPI in the market, accounting for a third of all sales.
During the same period last year, Lloyds recorded a loss of £3.2bn, again caused by PPI redress.
Chief executive Antonio Horta-Osorio said: "Mis-sold payment protection insurance policies are an industry legacy issue but by redressing those affected quickly we continue to do the right thing for our customers. We will tackle issues from the past in a way that will, in the long run, allow us to earn back customer trust and confidence."

The statement also gave more details about the sale of 632 branches to the Co-operative Group, known as Project Verde.
The sale is expected to be completed by November 2013 and will include 4.8m customers and £24bn of assets. The Co-operative will also acquire the TSB and Cheltenham & Gloucester brand from the Group.
The Co-operative will initially pay £350m for the branches followed by a deferred payment of £400m if targets are met, far less than the £2bn that Lloyds had initially hoped to receive.
Mr Horta-Osorio said: "I'm pleased we have come to an agreement with The Co-operative Group plc that will establish them as an effective competitor in the UK banking market.
"The deal provides certainty for our shareholders and I also believe the Co-operative will be a good home for our customers and colleagues."