The group, which owns Halifax Bank, said it would take a £1.8bn charge from PPI claims over the third quarter of the year. This is at the top of the £1.2bn to £1.8bn charge Lloyds had advised markets to expect.
This ate into the firm's pre-tax profit, which rose to £2.9bn in the first nine months of the year, below analyst expectations of £3.06bn.
Lloyds' chief executive Antonio Horta-Osorio said: “In the first nine months of 2019 we have made strong strategic progress and delivered solid financial performance in a challenging external environment.
"I am disappointed that our statutory result was significantly impacted by the additional PPI charge in the third quarter, driven by an unprecedented level of PPI information requests received in August. However, our performance continues to demonstrate the resilience of our customer franchise and business model, the strength of our balance sheet and that our strategy is the right one in this environment."
He said the bank will maintain its prudent approach to growth and risk, whilst focussing on reducing costs and investing in the business to transform the group for "success in a digital world".
He added: "Although continued economic uncertainty could further impact the outlook, we remain well placed to support our customers and to continue to Help Britain Prosper.”