Lloyds’ shares have risen dramatically after the announcement of a £1.6 billion profit today.

Pre-tax profit at the bank, which is 41 per cent owned by UK taxpayers, came in at £1.6bn, compared with loss of £4bn in the same period a year earlier.

The bank was bailed out in 2008 following a disastrous takeover of struggling HBOS, which nearly saw Lloyds collapse.

But today’s good news boosted investor’s confidence forcing the share price up by 3.5 per cent.

Along with HSBC, Lloyds has posted better than expected results this week, showing a profit for the first time since the financial crisis in 2008.

Analysts had predicted a figure of £800 million for the first half of this year but the actual sum was twice that.

Total income at Lloyds rose by almost a third, to £12.5bn from £9.8bn, while costs fell by more than £1bn, largely as a result of job losses, both of which helped to boost profits.

A reduction in bad debts was also a factor in Lloyds’ return to profit, coming in at less than half the figure seen for the same period last year.

Chief executive Eric Daniels said:”The first half of 2010 was a significant milestone for Lloyds Banking Group as the group returned to profit.

“Despite the challenging economic environment, the core business performed strongly and we continued to see positive momentum across all the key income lines.”

He also believes that the growth will be sustained over coming years as the UK economy shows signs of recovery.

“Given the business model we have established, coupled with the gradual recovery in economic growth in the UK, we continue to believe that the group is well positioned to deliver a strong financial performance over the coming years.”

As well as Lloyds and HSBC Britain’s other major banks, including Barclays and RBS are expected to post profitable results later this week.

© Fair Investment Company Ltd