The wealth arm of UK-listed Lloyds Banking Group reported a fall in pre-tax profit in 2011 while the overall parent firm suffered a full-year loss.

The wealth arm of UK-listed Lloyds Banking Group reported a fall in pre-tax profit to £189 million (around $297.6 million) last year, down 14 per cent from 2010, while net interest income rose 20 per cent over the 12-month period to £354 million.

The wealth business of the banking group falls within the “wealth and international” arm of Lloyds, which covers a number of business interests besides private banking, such as operations in Ireland and Australia. This group segment suffered a full-year loss in 2011 of £3.936 billion, narrowing from £4.95 billion in 2010.

As for assets under management in the international and private banking segment, they fell 5 per cent to £12.8 billion, driven by weaker markets and a cut in customer demand for investment products, the bank said in a statement of its full-year results today.

The results were issued a day after rival UK banking group – and also a firm that is part-owned by the state – Royal Bank of Scotland reported a rise in assets and earnings at its wealth arm. HSBC, meanwhile, is due to issue results next Monday.

Lloyds Banking Group said that at the overall group level, core combined businesses profit before tax increased by 3 per cent to £6.349 billion. However, on a statutory basis, Lloyds Banking Group reported a pre-tax loss of £3.542 billion, contrasting with a profit, on the same basis, of £281 million. The loss includes a £3.2 billion non-recurring provision for compensation payouts to holders of Payment Protection Insurance contracts. A number of UK banks have been sued for the sale of PPI policies in recent years, leading to billions of pounds in compensation awards.

The bank’s income fell by 10 per cent to £21.123 billion, reflecting subdued lending demand and continued customer deleveraging in the core, a smaller non-core portfolio, and a lower margin. The group had a Core Tier 1 capital ratio – as defined under Basel banking capital standards – of 10.8 per cent, a full 60 basis point improvement over the year.