Profit before exceptional items climbed to 2.9 billion pounds, beating the 2.34 billion-pound mean estimate of five analysts surveyed by Bloomberg.

“We're profitable, we're supporting the U.K. economy and that has enabled the U.K. government to begin the process to return the group to private ownership,” Horta-Osorio, 49, told reporters on a call today. It's up to the government on “how and when to do it.”

Lloyds said it plans to start talks with the regulator in the second half about the timetable and conditions for returning to dividend payments. Lloyds last paid a cash dividend in 2008, before its takeover of HBOS Plc forced it to seek a bailout, according to data compiled by Bloomberg.

The lender booked a 450 million-pound charge in the period for compensating customers who were mis-sold payment-protection insurance. It also set aside a further 50 million pounds to cover the costs of a U.K. regulator's probe of its claims-handling practices. In total, Lloyds has set aside 7.3 billion pounds for PPI, more than any other lender and almost half of the 15.5 billion pounds total for the industry.

Eoin Treacy's view The amount of money set aside for the mis-selling of payment protection insurance (PPI) is staggering, with Lloyds accounting for the greatest proportion. This article from the Express & Star carries more detail. However, this would appear to already be in the price with the share rallying consistently since last year.

A more pressing medium-term concern is the manner in which the government will seek to realise its investment in the bank. Provided the additional supply is released gradually, the impact on pricing should be manageable. The share (Est P/E 16.85, DY to be announced) rallied to post a new two-year high today but is overbought in the short-term and some consolidation of recent powerful gains is looking increasingly likely. A sustained move below the 200-day MA, currently near 55p, would be required to question medium-term recovery potential.

Royal Bank of Scotland is also majority owned by the UK government. With its earnings announcement due tomorrow the market appears to be pricing in a positive outcome. The share bounced today but a sustained move above 320p would be required to suggest a return to demand dominance beyond the short term.

Barclays (Est P/E 8.51, DY 2.49%) derives 30% of revenue from the UK and 15% from the Eurozone. The share has been largely rangebound for the last six months and tested the region of the 200-day MA this week. A sustained move below the 200-day MA, currently near 285p, would be required to question medium-term recovery potential.

Europe only accounted for 24% of HSBC's revenue in 2012 (Est P/E 11.65, DY 4.42%). The share has rallied from the region of the 200-day MA in late June to test the upper side of its range. A clear downward dynamic would be required to suggest supply dominance in this region.

While Standard Chartered is often considered a Hong Kong bank the firm's revenues are evenly distributed mostly throughout the Asian region. The share (Est P/E 10.17, DY 3.99%) found support in the region of 1400p from late June and a sustained move below 1470p would be required to question medium-term potential for higher to lateral ranging.

Bank of Georgia (Est P/E 8.16, DY 3.56%) represents the smallest weighting in the FTSE-350 Banks Index at 0.18%. Georgia accounted for 88% of revenues in 2012. The share IPOed in March 2012 and has held a progression of higher reaction lows since January. A sustained move below the 200-day MA would be required to question medium-term upside potential.