Taxpayer-backed Lloyds Banking Group swung to a loss in the first half of the year after it took a £3.2bn hit to tackle the payment protection insurance scandal.

Lloyds, which is 41% state-owned, reported a £3.3bn pre-tax loss in the six months to June, compared to a £1.3bn profit last year.

Stripping out the provision set aside for customers mis-sold PPI, the bank saw underlying profits plunge 31% to £1.1bn as it struggled with the "subdued" economic climate.

Elsewhere, the bank confirmed it had received "a number of credible initial approaches" for the 632 branches it is being forced to sell by EU regulators and hopes to have a buyer by the end of the year.