LARGER THAN EXPECTED losses on loans in Ireland contributed to Lloyds banking group posting £3.3 billion (€3.7bn) in losses in the six months to June this year.

The bank, 41 per cent of which is owned by the UK government, said the losses were primarily as a result of the cost of compensating customers who were mis-sold payment protection insurance in the UK, BBC News reports.

In May, it put aside £3.2 billion to cover the cost of this mis-selling.

The bank’s international unit reported a £2.1 billion (€2.4bn) loss due to the risk of its debt in Ireland not being paid back.

Some 64 per cent of the banking group’s Irish loans are now impaired and Lloyds said that “further vulnerability exists” in its Irish portfolio, according to the Irish Times.

Bank of Scotland (Ireland) – which was taken over by Lloyds in 2009 – ran up a heavy exposure to Ireland’s now collapsed property sector.

The bank’s Irish operations which included the Halifax were wound down last year and incorporated into Bank of Scotland in the UK.