Lloyds Banking Group took another 1 billion pound hit to compensate UK customers mis-sold loan insurance, taking its charge for the scandal to 5.3 billion pounds and dragging it to third quarter loss.

Britain's biggest retail bank on Thursday reported a pretax loss of 144 million pounds for the three months to the end of September, compared to a loss of 607 million pounds a year earlier.

Lloyds said its bad debts this year are expected to fall to about 6 billion pounds, about 1.2 billion less than it had expected at the start of the year, and said it is making good progress on its cost-cutting plan.

(Reporting by Matt Scuffham and Steve Slater)