LONDON (REUTERS) - Lloyds Banking Group on Tuesday set aside another 750 million pounds (S$1.5 billion) to compensate customers mis-sold loan insurance, overshadowing an almost doubling of its third-quarter underlying profit.

The bank, 33 per cent owned by the government, has now set aside more than 8 billion pounds to deal with the most expensive consumer finance scandal in British history, far more than any other bank.

British banks have in total set aside over 17 billion pounds to compensate customers mis-sold payment protection insurance (PPI). The policies were meant to protect borrowers in the event of sickness or unemployment but were often sold to people ineligible to claim.

Lloyds reported an underlying profit, not including the PPI charge, of 1.5 billion pounds, up 83 per cent on the same period the year before, reflecting an improved interest margin and lower costs and in line with analysts forecasts.