Lloyds Banking Group, the UK-listed bank which yesterday announced it was selling retail and private banking operations in Spain, today reported an underlying profit of £1.479 billion ($2.289 billion) in the first three months of 2013, up sharply from £497 million a year before.

The bank, partly owned by the UK taxpayer, logged a statutory profit before tax of £2.040 billion (Q1 2012: £280 million), it said today in a statement.

There was total underlying income of £4.889 billion, up 3 per cent, which includes a £394 million gain relating to the sale of shares in St James's Place, the wealth management business, it said.

The bank said group net interest margin increased to 1.96 per cent; it is on track to meet guidance for 2013.

There was a 40 per cent year-on-year reduction in impairment charges to £1.002 billion (Q1 2012: £1.657 billion).

"We made substantial progress again in the first quarter.  Underlying and statutory profits improved significantly, and our core loan book returned to growth earlier than expected.  Margin increased, and costs and impairments continued to fall rapidly, with this progress underpinned by a further strengthening of our balance sheet," António Horta-Osório, group chief executive, said.

The core tier 1 capital ratio – a benchmark of a bank’s capital strength - increased to 12.5 per cent (31 December 2012: 12.0 per cent).

Yesterday, Lloyds Banking Group announced it has agreed to sell its Spanish retail and private banking operations, including Lloyds Bank International SAU and Lloyds Investment España, to Banco Sabadell, subject to regulatory approval. The sale comprises the bank’s retail and private banking business and the local investment management business in Spain. The business being sold consists mainly of retail mortgages and deposits, with a large portion of non-resident clients. However, the Spanish corporate banking operations serving business clients are not included in the transaction and will continue to operate as usual.