Lloyds raises cost-cutting target after surge in profits State-backed lender Lloyds Banking Group has reported a sharp increase in first-quarter profits and raised the amount it expects to save by shrinking its operations. The group, which was last week dealt a blow after the collapse of its planned sale of 632 "Project Verde" branches to the Co-operative, posted an underlying profit of £1.5 billion for the first three months of the year, up from £497 million a year ago. Lloyds said its total costs for the year should be around £9.6bn, down from its previous guidance of £9.8bn, following the reduction of its stake in wealth manager St James's Place. With the group - 39 per cent owned by the taxpayer - now planning to float off the Verde branches by the middle of next year, it expects costs to fall further to about £9.15bn in 2014. It added: "This represents a reduction of around £2 billion since 2010 and around £1 billion more than the original strategic review target." Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said the surge in profits had been driven by a lack of large provisions for the mis-selling of payment protection insurance, which had weighed on previous results. He said: "Furthermore, the general disposal of non-core assets will enable the bank to focus more sharply on its fundamental business. There remain, however, some drags on the stock, such as the distraction of the sale or flotation of part of its branch network, the lack of reference to a return to the dividend and, of course, the overhang of the government stake.