Banking giant Lloyds has announced record annual profits.

The bank, which has a major base in Gloucester, said pre-tax profits jumped to £7.5bn last year, which was higher than expected and up 57% from the year before.

Britain's biggest mortgage lender, whose brands include Bank of Scotland and Halifax, credited higher interest rates, mostly a consequence of Bank of England action to tackle inflation, for the jump in income.

However, Lloyds has set aside £450m to cover the potential cost of an investigation into car finance deals by the UK's financial regulator, reported the BBC..

A probe into whether people had been paying too much for cars was launched by the Financial Conduct Authority (FCA) last month.

Brokers who arranged car financing earned commission on the interest rates that they set for customers.

The FCA announced last month that it would investigate whether people who believe they were charged too much for car loans were owed compensation.

Lloyds is seen as the most exposed of the major banks to any claims, as it owns one of the UK's largest motor finance providers, Black Horse.

Some analysts have claimed that the total compensation bill could run into the billions.