Lloyds TSB kicked off the UK bank reporting season on Wednesday by signalling its confidence in riding out the economic downturn by raising its interim dividend in spite of a 70 per cent fall in first-half pretax profits to £599m ($1.2bn).

But shares in the UK’s fourth-largest bank slid 4.6 per cent to 306p amid investor doubts about the sustainability of the dividend as the UK economy slows further and bad debts squeeze profits.