First-quarter statutory pre-tax profits came in at £288m, down from a £3.47bn loss in the same period last year and better than the £200m expected by the market.
Lloyds said the increased provision for PPI was in response to a rise on mis-selling complaints, which António Horta-Osório, the chief executive, said was partly down to bogus claims by claims management companies.
Stripping out one-off costs and asset sales, profits from combined business more that doubled to £628m in the three months to the end of March from £284m last year. Total income, net of insurance claims, fell 5pc to £4.49bn.
Most of the increase in profits was down to a 36pc fall in impairments to £1.66bn from £2.61bn. The bank, which plans to cut its workforce by 15,000, also kept costs down, reducing them by 7pc to £2.56bn.
The loan to deposit ratio dropped to 130pc from 148pc in the first quarter last year, reflecting the bank's push to pull in more savers.