London (AFP) - Britain's state-rescued bank Lloyds cut net losses in 2013 and ramped up staff bonuses, but its performance was hit by a vast compensation bill for mis-selling, it reported on Thursday.
Losses after tax stood at Â£838 million ($1.39 billion, 1.01 billion euros) last year.
That compared with a net loss of Â£1.471 billion in 2012, Lloyds Banking Group (LBG) said.
The bank took a vast provision of Â£3.5 billion, primarily relating to compensation for customers who were mis-sold payment protection insurance.
Earlier this month, the bank had warned that it would take an extra hit of almost Â£2.0 billion to cover mis-selling claims.
Lloyds, which is 33-percent owned by the taxpayer after a bailout at the height of the global financial crisis, added that revenues dipped slightly to Â£18.5 billion in 2013.
Underlying profit more than doubled to about Â£6.2 billion, in line with expectations, as it was boosted partly by asset sales as part of its ongoing restructuring.
Lloyds added that chief executive Antonio Horta-Osorio was in line for a deferred shares bonus of Â£1.7 million for 2013. The lender also lifted its staff bonus pool by eight percent to Â£395 million.
"Over the last three years we have reshaped, strengthened and simplified our business to create a low-risk efficient retail and commercial bank that is focused on our customers and on helping Britain prosper," Horta-Osorio said in the earnings release.
"These results, with group underlying profit more than doubled to Â£6.2 billion, confirm that the group is returning to robust health, thanks to the commitment of our people and the consistent execution of the strategy we set out in June 2011."
"We have a strong business model and have made significant progress, despite our legacy issues, in improving our capital position and profitability in a sustainable way.
"As a result, the UK government started the process of returning the group to full private ownership."
In September, Britain's coalition government offloaded a 6.0-percent Lloyds stake to institutional investors for Â£3.2 billion.
The bank revealed earlier this month that it will seek to resume shareholder dividend payments in the second half of 2014, and was preparing for the government to sell more of its holding.
"We also expect to apply to the regulator in the second half of the year to restart dividend payments at a modest level and to deliver progressive and sustainable payments to shareholders thereafter," added Horta-Osorio on Thursday.
"This will be another important milestone on our journey to rebuild trust and confidence in our group."