Lloyds Banking Group saw its profits double in the first three months of the year, driven by solid trading and lower charges.

The UK's biggest retail banking group, which also owns the Halifax and HBOS, said first quarter pre-tax profit jumped 99% to £1.3bn ($1.7bn), from £654m in the same period a year ago.

Lloyds, which is less than 2% owned by the taxpayer, was buoyed by the absence of an £800m bill in the first quarter of last year after buying back complex high-yield bonds that no longer counted towards the bank's capital buffers.

But the group was forced to earmark another £350m for payment protection insurance (PPI) in this year's first quarter, and £100m to compensate HBOS around 60 businesses who were victims of the HBOS Reading bribery scandal, before Lloyds acquired the lender in 2009.

The government said last week it had recovered the £20.3bn bailout it used to rescue the bank after its disastrous takeover of HBOS during the financial crisis. The government is expected to make a profit running into hundreds of millions of pounds once it offloads its remaining stake over the coming weeks.

Sweet Spot

Lloyds chief executive António Horta-Osório said: "In the first three months of this year we have delivered strong financial performance with increased underlying profit, a significant improvement in statutory profit and returns, and strong capital generation."

However, Horta-Osório added although the UK enjoyed low unemployment and robust asset qualities the bank endured "a challenging operating environment".

Richard Hunter, head of research at Wilson King Investment Management said: "Lloyds will be receiving some admiring glances from its competitors after a set of numbers which strongly underline its ongoing recovery.

"The strength of these figures have been achieved despite further provisions totalling £550m – PPI, HBOS, retail conduct issues – and are testament to the increasingly sweet spot in which the bank finds itself."