LLOYDS Banking Group has been defeated in a move to save around £1 billion by buying bonds back early.
The bonds were issued in 2009 shortly after Lloyds was bailed out by the UK government and were designed to provide an extra layer of capital.
However they pay annual interest of up to 16 per cent and were popular with thousands of retail investors.
Lloyds wanted to save £200m annually in interest payments over the next five years by arguing consumers should receive no more than the face value of the bonds.
But a high court judge ruled against the bank. It has said it will appeal the decision.
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