The bank, which is 39% owned by the British government, made a profit of GBP394 million by selling a 20% stake in the wealth management firm St. James’s Place.

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Lloyds said it continued to reduce its costs and cut the amount of money set aside to cover delinquent loans. The bank’s impairment charges fell 40%, to GBP1 billion, from the period a year earlier, while noncore assets fell 6% to GBP92.1 billion.

For the quarter ended 31 March 2013, the bank’s core Tier 1 ratio remained at 8.1% under the accountancy rules known as Basel III.

The bank also revealed that it has taken a GBP250 million hit from the sale of its loss-making Spanish business retail and private banking business, which has left it with a 1.8% stake in buyer Banco Sabadell.

As British regulators push banks to shore up their capital positions, Lloyds has been increasing its reserves through a series of recent disposals.

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Commenting on the results, Lloyds group chief executive António Horta-Osório, said: "We made substantial progress again in the first quarter. Underlying and statutory profits improved significantly, and our core loan book returned to growth earlier than expected. Margin increased, and costs and impairments continued to fall rapidly, with this progress underpinned by a further strengthening of our balance sheet."

"We are delivering real benefits for customers, colleagues and shareholders by investing behind our simple, UK customer-focused retail and commercial banking model, and are now further ahead in our plan to transform the Group, as reflected in the enhanced guidance for costs and capital we are giving today," he added.