Bad debts continued to haunt Lloyds Banking Group last year, pushing the part-nationalised bank to a £6.3 billion operating loss.
Impairment charges soared to £24 million following its forced marriage with HBOS in October 2008. However, these began to tail off in the second half of the year, down 21% on the first six months, with further improvements expected this year and "substantial reductions" in 2011.
Chief executive Eric Daniels says a more conservative approach to risk management has now been implemented across the group.
"We expect reductions in all three customer divisions, although we remain cautious on the Irish portfolios, given the uncertain economic outlook," he adds.
The group, which is 41% owned by the government, says it had "delivered a resilient trading performance against the backdrop of a marked slowdown in the UK economic environment and continued challenges in the financial markets".
In 2008 it delivered a £6.7 billion loss after its results were recalculated as if it had owned HBOS then. Its bad losses then stood at £14.9 billion mainly due to the HBOS portfolios and their high level of exposure to commercial property.
Lloyds said it is expecting a "weak upturn" in the economy this year.
At the end of 2009, its core tier one capital stood at 9.1% after its mammoth £22.5 billion fundraising in the latter part of last year.
The group is expected to pay out around £200 million in bonuses to staff - a far cry from the £1.3 billion pot at Royal Bank of Scotland (RBS) which has a substantially bigger investment banking division.
At the beginning of the week, chief executive Eric Daniels announced he was following the lead of his fellow banking bosses in waiving his £2.3 million bonus for the year.
This marks the second year he has chosen to forego his bonus.
Lloyds has also been steadily selling off assets after the European Commission ruled it must make disposals in return for receiving state aid.
Earlier this month it sold off its stake in online insurer esure for £185 million. This marks Lloyds' fifth disposal since it started selling off its non-core businesses around six months ago and takes the total raised to around £500 million.