LONDON (AFX) - UK banking group Lloyds TSB PLC turned in an 8 pct increase in first half profit, helped by strong sales of insurance products and tight cost controls.

Lloyds, the UK's fifth-biggest bank, said pretax profit for the six months to June 30 came in at 1.752 bln stg, up from 1.626 bln stg in the same period last year, and marginally ahead of the consensus analyst forecast of 1.72 bln stg.

The improvement was driven by Lloyds' insurance and investments arm and its wholesale and international banking division, where profits rose 10 pct and 11 pct respectively. That helped offset sluggish growth at the UK retail bank, where profits were up just 2 pct.

The bank said sales at Scottish Widows rose by 35 pct during the first half, driven by growing demand for savings and investment products amid government warnings of a looming pensions crisis. In a conference call with reporters, Lloyds chief executive Eric Daniels said the group plans to repatriate 400 mln stg in capital from Scottish Widows this year.

Lloyds also announced an increase in bad debts, with the total impairment charge up 20 pct on the year at 800 mln stg, in line with forecasts. Bad consumer loans accounted for the bulk of the increase, with the retail bad debt charge climbing 16 pct to 632 mln stg.

Finance chief Helen Weir said that the overall charge will 'stabilise' over the rest of the year, with retail bad debts set to hold steady as tighter lending criteria start to take effect.

Most UK lenders have been hit by bad debt problems as rising interest rates and energy costs pile further financial pressure on heavily-indebted consumers.

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