The bill for mis-sold payment protection insurance (PPI) at taxpayer-backed Lloyds Banking Group has soared to £4.3bn as claims against the bank continue to pile up.
The 40% state-owned lender was pushed to a £439m loss in the first half of the year as it took an additional £700m charge for dealing with the scandal.
The escalating PPI provision will leave taxpayers wondering when they will get their money back, campaigners warned, as the share value remains less than half the price tag paid by the Government.
But shares rose by more than 1% after Lloyds revealed a lower bad debt charge, reduced eurozone exposure, increased small-business lending and higher underlying profits in its core businesses.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "The numbers certainly fail to shoot the lights out, but there are signs of improvement."
Lloyds touched briefly on the most recent scandal to rock the industry - the Libor rigging affair - as it admitted some companies within the group had received subpoenas from government agencies.
But the lender said it was not possible to predict "the scope and ultimate outcome" of the various investigations or private lawsuits related to the allegations.
Lloyds, which includes the Halifax, was pushed to an annual loss of £3.5bn in 2011 by the PPI mis-selling scandal, which has plagued the entire banking sector.
The scale of claims received was underlined by figures showing it had 1,000 staff working on "erroneous" claims alone, driven by so-called ambulance-chasing legal firms.
Chief executive Antonio Horta-Osorio said: "Mis-sold PPI policies are an industry legacy issue but by redressing those affected quickly we continue to do the right thing for our customers."
But Robert Oxley, campaign manager at the TaxPayers' Alliance, was not convinced.
He said: "The future looks bleak for taxpayers who have seen huge amounts of their money used by politicians to prop up the banks and are now exposed to continued losses from the PPI scandal."
Mr Horta-Osorio's strategic review unveiled last year included thousands of job losses, as well as plans to sell off large parts of its international operations.
The group said it had cut its non-core assets by £23bn to £118bn in the period, which is ahead of expectations, while its international presence continues to decline, after it announced disposal or exit from 10 countries.
But this has hit underlying income, which fell 17% to £9.2bn.
Mr Horta-Osorio also said the bank was looking to implement ring-fencing proposals, put forward by the Independent Commission for Banking, ahead of the 2019 deadline suggested by the Government.
The move would see Lloyds' retail operations separated from investment banking products.