Part-nationalized Lloyds Banking Group provided further evidence Thursday that it was getting its business back on track, even though it set aside another 1 billion pounds ($1.6 billion) to pay claims for mis-selling payment protection insurance.

The additional provision to compensate customers who bought insurance they didn't need raised the bank's estimate of the total cost to 5.3 billion pounds. Some in the markets had feared that the provision could have been still higher.

News of the additional charge came as the bank, which is 40 percent owned by British taxpayers, reported a net loss for the three months ending Sept. 30 of 361 million pounds, well down on last year's equivalent of 501 million pounds. The pretax loss of 144 million pounds was down from 607 million pounds a year earlier.

Lloyds said its underlying profit — excluding the insurance provision, the cost of disposing of businesses and other items — doubled to 840 million pounds.

Investors took comfort from the bank's gains in underlying profit, and its share price was up 3.6 percent at 42 pence in early trading.

"While the additional below the line provisions are disappointing, and there is a risk of still more to come, we believe the company is making excellent progress in improving performance in the underlying business," said Gary Greenwood, analyst at Shore Capital.

Greenwood had feared that Lloyds might announce an additional mis-selling provision in excess of 2 billion pounds.

For the first nine months of the year, Lloyds said it had narrowed its net loss by 64 percent to 1.0 billion pounds. Non-core assets were reduced by 31 billion pounds to 110 billion pounds, ahead of full-year guidance.

"We remain confident that, by delivering our strategy to be a simple, customer-focused U.K. retail and commercial bank, we can rebuild the trust of our customers and other stakeholders and can deliver sustainable returns for our shareholders over time," said Chief Executive Antonio Horta-Osorio.