The Lloyds Banking Group PLC (NYSE:LYG) (LON:LLOY) announced Thursday that it is setting aside an additional 1 billion pounds ($1.6 billion) to compensate clients who were sold insurance inappropriately, as it posted a narrower third-quarter loss.

Britain’s biggest mortgage lender posted a net loss of 361 million pounds, compared with the loss of 501 million pounds in the year-earlier period. The total funds set aside as provisions now amount to 5.3 billion pounds, more than any other U.K. bank.

Lloyds Banking Group

Lloyd’s pretax profit for the quarter jumped to 840 million pounds from 419 million pounds in the year-earlier period, beating the 554 million-pound estimate of 14 analysts surveyed by Bloomberg. The firm’s net interest margin squeezed to 1.93 percent from 2.05 percent in the three months ending in September last year.

“We have made further significant progress this quarter, improving underlying performance in a challenging environment,” Chief Executive Officer Antonio Horta-Osorio, 48, said in the statement. “Disappointingly, legacy issues continue to affect our results”.

After the order from the regulators, to compensate the customers who were sold insurance to cover their repayments on mortgages, credit cards, and other loans inappropriately; British lenders have put aside more than 10 billion pounds as provisions. While Britain’s second-biggest bank, Barclays PLC (LON:BARC) (NYSE:BCS), has pledged to take an additional 700 million-pound charge.

Finance Director George Culmer told reporters that Lloyds Banking Group PLC (NYSE:LYG) (LON:LLOY) monthly PPI settlement claims fell to 250 million pounds a month in the third quarter from 300 million pounds in the second half. “We would expect that trend to continue,” Culmer said. It “remains uncertain” if more provisions are needed, he said.

The mortgage lender’s loss narrowed, mainly due to the decline in provisions for mortgages, by 35 percent to 1.26 billion pounds as impairments slowed at its Irish unit. For Ireland, where commercial real estate prices and home prices slumped 65 percent and 50 percent since 2007, Lloyds has set aside more than 10 billion pounds to cover losses on real estate loans.

Up till now, Barclays PLC (LON:BARC) (NYSE:BCS), which posted a Q3 loss of 200m pounds,  has set aside 2 billion pounds to cover insurance claims, Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) 1.3 billion pounds, HSBC Holdings plc (LON:HSBA) (NYSE:HBC) 1.1 billion pounds, and  Banco Santander, S.A. (NYSE:SAN) U.K. about 731 million pounds.

“There was a big worry that Lloyds Banking Group PLC (NYSE:LYG) (LON:LLOY) was going to have to take another 3 to 5 billion pounds of PPI provisioning,” said Cormac Leech, a banking analyst at Liberum Capital in London who has a buy rating on the stock. “There are quite a few key positives here, such as lower loan losses, a smaller-than- expected PPI charge, and an improvement” on its return on assets, he added.