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Lloyds Banking Group Plc. reported an increase in third-quarter profit as it confirmed a cost-cutting plan, two days after it almost failed ECBs stress test.

On Tuesday Lloyds stated an underlying profit of £2.16 billion for the three months ended September 30, compared with £1.52 billion last year. Underlying net profit was £693 million, compared to a £1.3 billion loss year-to-year. Earnings per share rose to 0.9 pence.

Performance was offset by a large provision to compensate customers for mis-sold insurance products. The bank added an additional £900-million charge and brought the total cost to cover potential claims to £11.33 billion, surpassing every other bank in the matter and accounting for nearly half of the full-bill of the industry.

Citi analysts projected Lloyds to set aside another £1 billion for PPI compensation next year. The banks CFO George Culmer said on a conference call that there is a possibility of a further increase.

Tier one capital ratio increased to 12% compared to 10.3% at the end of 2013.

Lloyds, 25%-owned by the British government, narrowly passed the European Central Banks stress test, designed to check whether banks could endure another economic crash.

After it got the worst result across all British banks, Lloyds faces further examination by the Bank of England. In December the biggest mortgage lender in the U.K. will be tested against different situations, including a 35% decline in house prices and increases of up to 6% in interest rates.

Lloyds confirmed a three-year plan to cut costs, as it switches its focus to digital services. Including workforce reduction of 9 000 employees, the plan is aimed at closing 200 branches in urban areas where there is an overlap. The company has a target of £1 billion in savings by the end 2017.

“The next phase of our strategy builds on these strong foundations to meet the rapidly changing needs of our customers,” CEO Antonio Horta-Osorio said in a statement.

The bank, which currently has a 2 253-branch network, said that even after the 6% cut it would still have the biggest share of branches among its competitors.

“Over the next three years, we will invest about £1 billion to deliver simple and efficient digital products and services for customers across our businesses,” Lloyds said.

Lloyds Banking Group Plc. lost 1.8% on Monday and closed at GBX 75.34 in London. On Tuesday the stock dropped 1.78% to trade at GBX 74.00 at 15:02 GMT, marking a one-year decrease of 7.06%. The lender is valued at GBP 53.77 billion. According to the Financial Times, the 26 analysts offering 12-month price targets for Lloyds Banking Group Plc. have a median target of GBX 88.00, with a high estimate of GBX 115.00 and a low estimate of GBX 55.00. The median estimate represents a 16.80% increase from the last close price of GBX 75.34.

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