LLOYDS TSB became the latest financial institution to announce it had made billions of pounds profit in the past year.

The bank reported profits of £4.35bn as it delivered strategic and financial news to the City that echoed a confident year for other finance houses.

The news follows HSBC's record £7.7bn profits and the Royal Bank of Scotland's £7.15bn.

Lloyds TSB's profits, in line with market expectations, represented a 66 per cent improvement on the previous year after the sale of a number of overseas businesses contributed about £865m to the company's bottom line.

Stripping out the disposals and other one-off factors, Lloyds said profits were down by four per cent to £3.38bn.

Most of the shortfall related to changes made in business banking following a Competition Commission inquiry.

The performance follows a string of strategic changes introduced by new chief executive Eric Daniels in the wake of a 17 per cent fall in profits.

During the year, Lloyds sold a number of its businesses, including the National Bank of New Zealand and most of its operations in Brazil, as it moved to focus on core franchises and remove "significant earnings volatility".

Mr Daniels also acted to reduce costs, cutting the group's staffing levels by about 1,200 to 71,609 at the end of the year.

He said he was confident of a further improved performance by the second half of this year.

Pre-tax profits from the group's core UK retail banking and mortgages business increased by one per cent to £1.02bn.