Bank of Scotland plc — owned by Lloyds Banking Group — has reported that its profit before tax for the half-year to June 30, 2022, fell about 18% to £1.157 billion.

The bank said “total profit” for the period was £843 million, down against the prior period “reflecting the non-repeat of the impairment and deferred tax credits” in the first half of 2021.

Total first-half income at Bank of Scotland of £2.632 billion was down 3% on the first half of 2021, “with reduced net interest income partly offset by higher other income.”

Net interest income of £2.472 billion was down 4% compared to the first half of 2021, “impacted by higher funding costs on intra-group borrowing which more than offset the effects of average interest-earning asset growth and benefits from the UK Bank Rate increases.”

Bank of Scotland said operating expenses of £1.457 billion were 6% lower than in the first half of 2021, reflecting lower remediation costs and continued cost discipline.

“There have been no further charges relating to HBOS Reading since the year-end and the provision held continues to reflect the group’s best estimate of its full liability, albeit significant uncertainties remain,” said Bank of Scotland.

“Asset quality remains strong with sustained low levels of new to arrears, remaining below pre-pandemic levels.

“Impairment in the first half of the year was a net charge of £18 million, compared to a net credit of £252 million in the first half of 2021, reflecting a low observed performance charge alongside updates to the economic outlook.

“The updated outlook includes additional risks from a higher inflation and interest rate environment, partially offset by reductions in COVID-19 related risks.

“Overall the group’s loan portfolio continues to be well-positioned, reflecting a prudent through-the-cycle approach to credit risk with high levels of security, also reflected in the strong recovery performance.”