LloydsTSB profits from high street banking in the UK slid 18% to 633 million, which the company said reflected ''substantial investments'' it had made to support future growth such as improved products and services.
Lloyds to grow lending 'prudently and profitably'
The firm said it invested heavily in improving customer service in its branch network and had seen a 14 per cent increase in product sales.
Profits from mortgages rose seven per cent to 955 million, with net new lending of 3.9 billion, giving an estimated market share of 7.1 per cent.
Lloyds said its objective had been to grow mortgage lending ''prudently but profitably'', which meant net new lending was lower than the group's natural market share but profits were strongly ahead.
Its insurance and investment division, which includes the Scottish Widows business Lloyds bought in 2000, saw operating profits rise 12 per cent to at 1.6 billion.
Growth in sales of life and pensions offset a decline from unit trusts, caused by the downturn in the market during the second half of 2001.
LloydsTSB Lloyds international banking division was, however, hit by the economic troubles in Argentina, which wiped 100 million from profits. The international division reported an overall 7 per cent decline in profits at 444 million.
Overall, provisions for bad and doubtful debts at the end of the year added up to 1.47 billion, against 1.43 billion the previous year.
Chairman Maarten van den Bergh said: ''I am pleased to be able to report that again the group has performed well, particularly against the weakening economic backdrop in the UK and other global economies.''
Chief executive Peter Ellwood said the business was in ''good shape''.