LONDON (Reuters) - Lloyds Banking Group LLOY.L is to step up its cost cutting plans to help to offset a more testing economic environment caused by Britain's vote to quit the European Union.

Britain’s largest retail bank aims to save 400 million pounds by end-2017 by axing a further 3,000 jobs and closing an additional 200 branches to protect its earnings and dividends against the effects of lower-for-longer interest rates.

Lloyds, rescued in a 20.5 billion pound taxpayer bail-out during the financial crisis, is the first major British bank to report results since the referendum and is the most exposed to any downturn in the British economy.

Chief Executive Officer Antonio Horta-Osório is searching for ways to prop up Lloyds’ dividend, one of its key attractions, and sustain profit growth in its main UK consumer and commercial lending market, still reeling from the Brexit result on June 24.

“While the business will remain highly capital generative, it is possible that this capital generation may be somewhat lower in future years than previously guided,” the bank said in a statement on Thursday.

So far this year, Lloyds has already said it would cut about 4,000 positions from its 75,000-strong workforce and has closed nearly 100 branches this year. The bank said it would look to sell off unwanted properties to increase income.

“Lloyds remains a no growth bank,” Ian Gordon, an analyst at Investec, said. “Its revenue outlook is flattish, hence its costs need to fall faster.”

People walk past a branch of Lloyds Bank on Oxford Street in London, Britain July 28, 2016. REUTERS/Peter Nicholls

The bank also said Britain’s financial watchdog had opened an investigation into how it treated customers who had difficulty repaying their mortgages and said it had set aside 350 million pounds for compensation. Chief Financial Officer George Culmer said he could not provide more details because the investigation was confidential.

Lloyds’ shares were down 4.1 percent at 53.41 pence by 1353 London time partly in response to the bank’s caution on future capital generation and its possible impact on dividends.

PROFIT

Britain’s vote to leave the EU came at the end of the bank’s first half, so the likely impact on lending volumes will not become clear until the third quarter and beyond.

Horta-Osorio said the bank’s strategy to grow revenues in a low rate environment would involve expanding in car finance, credit cards and insurance.

Lloyds reported a forecast-beating first-half statutory pretax profit of 2.45 billion pounds ($3.3 billion) in the six months to June 30. This was more than double profits achieved in the same period last year, partly because the bank did not have to set aside money for loan insurance mis-selling.

Income for the first half of the year came in at 8.9 billion pounds, just below the 2015 figure.

The bank said its net interest margin - a key performance measure – had widened to 2.74 percent over the period. It affirmed previous guidance of about 2.7 percent for the full year.

A rise in troubled loans by almost a third to 254 million pounds took the shine off the profit beat and robust margin performance and offered a glimpse of tougher times that might lie ahead.

Lloyds said it would pay an interim dividend of 0.85 pence, up 13 percent on last year. The government has put on hold plans to sell its remaining stake in Lloyds in the aftermath of the EU vote, according to people familiar with the process. Lloyds’ shares have lost about a quarter of their value since the vote.