Lloyds, Britain's biggest retail bank, is set to reveal an increase in the amount of cash it has set aside to compensate customers for mis-sold loan insurance when it reports full-year results on Friday.
Lloyds has already provisioned for a bill of 5.3 billion pounds to reimburse customers wrongly sold payment protection insurance (PPI), more than any other bank, and analysts say it could increase that by another billion.
In February, Lloyds was fined 4.3 million pounds by Britain's financial regulator for not paying compensation quickly enough.
The policies were meant to protect borrowers who found themselves out of work because of sickness or redundancy but were often sold to customers who did not want or need them.
The bank is also expected to say it has set aside hundreds of millions of pounds to compensate small businesses wrongly sold complicated interest-rate hedging products.
Lloyds, which is 41 percent owned by the government following a bailout during the 2008 financial crisis, is expected to report an underlying pre-tax profit of about 2.4 billion pounds, according to Thomson Reuters I/B/E/S data.
However, it is expected to have made a net loss of about 1 billion pounds, according to the data, hit by charges related to past misconduct.
Lloyds is expected to give an update on when it expects to start paying dividends again and on the prospects for the government to start selling its shares in the bank.
It will also provide an update on its planned sale of more than 600 branches to the Co-operative Group. The deal is reported to have hit difficulties.
(Reporting by Matt Scuffham; Editing by Dale Hudson)