Lloyds Bank Group has reported a 7% fall in annual pre-tax profits to £1.6bn compared with £1.8bn a year earlier.
The bank increased provisions for payment protection insurance (PPI) compensation in the year to £4bn.
That was after the City watchdog said it was considering a deadline on compensation claims.
Lloyds shares are up 12% in afternoon trading, making the bank the biggest riser on the FTSE 100.
Lloyds Banking Group
has faced the largest amount of PPI compensation claims. The new
provisions takes the total the bank has set aside to pay compensation to
£16bn.
