Lloyds , Britain's biggest retail bank which was part-nationalized during the credit crisis, returned to profit in the first half of 2010 from a loss a year earlier after lower bad debt charges boosted earnings.

Lloyds Banking Group said on Wednesday it made a pretax profit of 1.603 billion pounds ($2.48 billion) for the six months ending June, compared with a loss of 3.96 billion a year earlier.

Total impairments fell to 6.55 billion from 13.4 billion a year ago against the backdrop of a stabilizing economy, while lower costs also helped boost the company's profits.

According to Thomson Reuters I/B/E/S, the mean estimate for the interim pretax profit stood at 694 million pounds, while the Thomson Reuters StarMine smart estimate stood at 621.8 million pounds.

Forecasts had ranged widely, from 492 million to 1.1 billion, according to StarMine.

We expect to deliver strong medium-term performance as the UK economy sees a gradual recovery, Lloyds said in a statement.

Lloyds shares closed down 0.7 percent at 71.92 pence on Tuesday, giving the bank a market capitalization of around 49 billion pounds.

Lloyds shares have risen around 44 percent since the start of 2010, outperforming a 4 percent gain in the DJ Stoxx European bank sector <.SX7P>.

($1=.6465 Pound)

(Reporting by Sudip Kar-Gupta; editing by Simon Jessop)