Lloyds Banking Group has reported a return to profit for the first half of the year, largely due to a drop in the amount set aside to cover bad loans.

Pre-tax profit for the six months to the end of June came in at £1.6bn, compared with loss of £4bn in the same period a year earlier.

Money set aside to cover bad loans fell from £13.4bn to £6.5bn.

On Tuesday, Northern Rock reported a return to profit for the period, while on Monday HSBC posted a profit of £7bn.

Total income at Lloyds rose by almost a third, to £12.5bn from £9.8bn, while costs fell by more than £1bn, largely as a result of job losses, both of which helped to boost profits.