Lloyds Banking Group PLC, the U.K. lender that bought HBOS PLC in January, announced Wednesday that provisions for bad loans would decline "significantly," after its first-half loss of $5.2 billion.

The banking company set aside $22.7 billion during the period to cover souring commercial and real estate loans, more than the $19.1 billion that was the average of estimates by eight analysts.

Lloyds sought a $28.8 billion bailout from taxpayers after it agreed in September to buy HBOS. The latter accounted for about 80% of the combined companies' bad-loan provisions, Lloyds said Wednesday.

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