Lloyds TSB has reported a 70% fall in profits to £599 million in the first half of 2008, reflecting how market turbulence has taken its toll on the banking sector.

The high street bank says it has grown during the period, but blames the fall in profits before tax on market turbulence and lower sales of equity-based saving and investment products.

Its insurance arm, Scottish Widows, saw its profit before tax increase 15%, as sales increased by 8%.

Like other banks, Lloyds TSB enjoyed a strong inflow of retail deposits during the period, as it grew its saving business by 10% as well as its current account business. And, despite the downturn in the mortgage market, Lloyds TSB has increased its market share to 24.4%.

Earlier in the week, Abbey reported that it had knocked Halifax off the top spot as the UK’s biggest lender. The Spanish-owned bank says it has a 26% share of the mortgage market, in contrast with the 20% share Halifax boasted in previous years.

HBOS, which owns Halifax, will deliver its financial results tomorrow.

Sir Victor Blank, chairman of Lloyds TSB, says: "The first half of 2008 has been a period of considerable turbulence for the financial services sector and this has been compounded by the marked slowdown in the UK economy as a whole.”

The bank doesn’t see much light at the end of the tunnel, predicting a lower level of growth across the UK economy, which it admits will impact its business.

In a statement to shareholders, Lloyds TSB says: “Our central forecast for UK economic growth this year remains at the 1.6% we quoted in our 2007 full year results.

“Our business plans also recognise the potential risk of a more severe economic downturn, and recent events suggest that such a risk has increased.”

• banks