By Jonathan Davies

Lloyds Bank has raised its profit forecast and says it is ready to become a major dividend payer again, despite reporting an 11% fall in its profits for the first three months of the year.

Share prices rose more than 3% in early trading above 80p per share. Lloyds said that reduced costs would boost profit margins above previous forecasts for the rest of the year.

The bank reported profits of £1.214 billion in the first quarter.

It comes as Lloyds, which is 20% owned by the taxpayer, says it lost £660 million on the sale of TSB to Spanish bank Sabadell.

Lloyds was forced to spin-off TSB as part of the terms of its bailout package during the financial crisis. The deal, announced in March, is worth £1.7 bn.

Excluding losses on the sale of TSB, Lloyds said underlying profit was up 21% to £2.178bn.

The bank's chief executive Antonio Horta-Osório said there had been "continued improvement in financial strength" during the quarter.