Chancellor George Osborne is to sell off bailed-out Lloyds bank even as it continues to spend taxpayers' billions on repaying mis-selling victims.

The banking group confirmed yesterday it had set aside a further £1.8 billion for compensation, bringing total payouts to nearly £10bn over its flogging of useless payment protection insurance policies to customers.

Yet chief executive Antonio Horta-Osorio cheerily went on to project underlying profits of £6.2bn for the past year.

The coalition plans to hand the bank back to the private sector once it begins paying dividends again in September for the first time since its £17bn bailout in 2009.

Mr Horta-Osorio, who pockets around £3.4 million a year in pay, perks and bonuses, described the move as "another important step in our journey to rebuild trust and confidence."

His executives have begun "preparation of certain documents required for a possible future sale of shares in Lloyds Banking Group to the public" - believed
to take place as early as April.

The coalition has already begun to dump shares back onto the market, floating a 6 per cent stake to investors in September.

The Campaign for Public Ownership's Neil Clark yesterday described the sales pitch as "textbook neoliberalism."

"We've seen it time and time again. We've seen it with Network Rail, we've seen it with the Royal Mail," he said.

"If George Osborne was serious about making money for the Exchequer he'd keep the bank in public ownership."