LONDON — Britain's Lloyds Banking Group on Thursday posted a 38-percent slump in 2019 net profits, after taking a "substantial" hit from the notorious PPI insurance mis-selling scandal.

Profits after taxation dived to almost £2.46 billion ($3.19 billion, 2.95 billion euros) last year compared with £3.98 billion in 2018, LBG said in a results statement.

In total last year, the bank set aside £2.5 billion — nearly the same level as its net profit — to cover claims over the mis-selling payment protection insurance (PPI).

Pre-tax profit meanwhile slid 26 percent to stand at £4.39 billion.

Most major British banks faced a deluge of compensation claims regarding the controversial insurance product, ahead of the official claiming deadline last August.

"The group's statutory performance was impacted by a substantial PPI charge related to the deadline for claims submission," said Chief Executive Antonio Horta-Osorio.

Lloyds was by far the worst affected British bank in the crisis — with its total bill reaching about £22 billion — but it took no new charges in the fourth quarter of 2019.

Nevertheless, Horta-Osorio added Thursday that last year it had "continued to make significant strategic progress while delivering solid financial results in a challenging external market".

He noted: "Underlying performance was resilient, reflecting the health of our customer franchise and the strength of the business model."

The London-listed financial services giant, whose brands include Lloyds, Halifax, Bank of Scotland, Scottish Widows and MBNA, operates mostly in Britain and has more than 30 million commercial and residential customers.

Horta-Osorio also sounded a cautious note Thursday over the outlook in the wake of Britain's departure from the European Union last month.

"Given our clear UK focus, our performance is inextricably linked to the health of the UK economy," he said.

"Throughout 2019, UK economic performance has remained resilient in the face of significant political and economic uncertainty, supported by record employment, low interest rates and rising real wages.

"Although uncertainty remains given the ongoing negotiation of international trade agreements, there is now a clearer sense of direction and some signs of an improving outlook."

Britain left the EU on January 31 but remains bound by its rules in a transition period that expires at the end of this year, to allow both sides to negotiate a new trading relationship.

Back in 2011, British banks lost a high court appeal against tighter regulation of PPI, which provided insurance for consumers should they fail to meet repayments on a credit product such as loans, mortgages or payment cards.

PPI became controversial after it was revealed that many customers had been sold it without understanding that the cost was being added to their loan repayments. British authorities subsequently banned simultaneous sales of PPI and credit products.— AFP