The state-backed Lloyds Banking Group has fallen back into the red, its with provision for the payment protection insurance (PPI) mis-selling scandal soaring to more than £8billion.

The group, which is 33% owned by the taxpayer, recorded statutory pre-tax losses of £440million in the third quarter of the year, compared with a £151m loss in the same period last year.

Underlying earnings nearly doubled to £1.52bn but the bank had to increase the money set aside for PPI provision by £750m to £8.02bn as complaints over the scandal fell more slowly than expected.

The bottom line was further weighed down by losses from sales of assets during a period when it disposed of a German life insurance business as well as operations in Australia.

The results were the first since the Treasury began the process of returning its stake in Lloyds to the private sector, selling a 6% chunk for £3.2bn to institutional investors last month.

The total PPI provision includes £1.7bn for administration costs alone. Lloyds also said that so far £1.7bn of the £8bn set aside remained unused, indicating that £6.3bn has already been spent on the compensation programme.

In the third quarter, £706m was spent, a higher-than-expected figure that included £161m for administration. The average rate of upheld complaints has been rising since the start of the year, the bank said.

The overall volume of complaints continues to fall “although more slowly than projected”. Weekly complaints averaged 11,000 in the period, down from 12,500 in the second quarter, the group said.

Despite the losses, Lloyds hailed the strong underlying improvement in performance and said it was in talks with regulators about re-starting dividend payments for the first time since 2008 when it was rescued by the Government.

Chief executive Antonio Horta-Osorio said: “We are well on our way to becoming a better, simpler, low-risk bank, which delivers the products our customers need and the strong performance and sustainable returns our shareholders expect.”

Lloyds, which also includes Halifax Bank of Scotland, swung out of the red earlier this year with half-year profits of £2.1bn.

Since then it has spun off more than 600 branches under the revived TSB brand, with plans to float the business on the stock market next year, but the move, known as Project Verde, represented another major hit to its balance sheet for the latest period.

The latest results showed “simplification and Verde” costs at £408m for the third quarter.