LLOYDS Banking Group is considering reintroducing the Halifax brand north of the Border, seven years after it was ditched in favour of universal branding as Bank of Scotland.

Lloyds posted a £439 million loss for the first half of 2012 after taking a further provision of £700m for payment protection insurance (PPI) compensation.

Chief executive Antonio Horta-Osorio warned the banking industry faced a "deep crisis of confidence" as underlying income fell 17% to £9.2 billion.

Its Edinburgh-based funds arm Scottish Widows Investment Partnership (SWIP) saw accelerating net outflows of £3.8bn in the first half of 2012, although profits rose.

Lloyds said it intends to sell or close its Edinburgh-based online and telephone banking arm, Intelligent Finance (IF), after Co-operative Group opted not to take it as part of deal to buy a 632 branches.

Lloyds, which acquired Halifax Bank of Scotland in 2009, also admitted some of its businesses have received subpoenas from government agencies over manipulation of interest rates.

After Halifax and Bank of Scotland merged in 2001 the 60 Scottish Halifax branches were closed or rebranded over four years. But Mr Horta-Osorio said 41% state-owned Lloyds has attracted and retained customers by operating Halifax as a challenger brand south of the Border, where it tends to have younger customers than Lloyds TSB.

He said: "We do not have the same in Scotland which is something we have to consider."

Asked by The Herald about his plans for Intelligent Finance, Mr Horta-Osorio said: "Either we will sell it or we will close it."

This will require European Union approval because IF was part of the Project Verde portfolio Lloyds was required to sell after taking a £20bn taxpayer bail-out.

The job implications of a closure are not clear.

Mr Horta-Osório admitted Lloyds could lose up to £800m from the sale of 632 branches, including 189 in Scotland, to the Co-op but said this would be offset by a cut in the capital needed.

Creating the Verde network will cost it £1bn, he said.

Lloyds took a further £3.2bn of impairments on bad debts –down 42% on last year.

Customers pulled £8.4bn from SWIP funds in the first six months of the year while just £4.6bn of new money was invested to take the total to £181.5bn.

This was an acceleration of the trend seen in the same period last year when a net £2.8bn was withdrawn.

Lloyds said the outflows "reflect expected attrition on insurance funds", volatile financial markets and a move by customers from funds to deposits.

SWIP reported a £4m rise in pre-tax profit to £56m.

Its managing director Dean Buckley said "Already this year we have made significant progress in a number of our key initiatives."

This year SWIP adopted a computer-based quantitative investment approach on funds and axed 27 managers' posts.

Lloyds's insurance arm, which includes Edinburgh-based Scottish Widows, saw underlying profit fall 26.3% largely due to declining returns from policyholder funds.

Recent harsh weather also meant claims were 40 times higher in June than the year before.

Lloyds said it received subpoenas from investigators looking at the manipulation of the London Interbank Offered Rate. No employees have been dismissed over the issue and finance director George Culmer said there was no need for the bank to set aside funds for potential litigation.

Meanwhile, compensation for mis-selling PPI has now cost Lloyds some nearly £1.1bn this year and £4.3bn in total. Half of claims are false, the bank said.

Stripping out the impact of this, Lloyds said underlying profit increased by £715m to £1.064bn, higher than most forecasts. Employee numbers fell to 95,975 from 98,538 six months ago. Lloyds's shares dropped 0.155p or 0,5% to 29.135p.