But the bank says taking into account the impact of volatility profit before tax rose 6 per cent to £3,919m.
Gross new mortgage lending for the Group totalled £29.4bn, up from £27.6bn in 2006.
Mortgage balances outstanding increased by 7 per cent to £102.7bn and net new lending totalled £6.7bn, resulting in a market share of net new lending of approximately 6.2 per cent.
The Group says it has delivered good levels of mortgage growth, focusing on prime mortgage business and seeking to maintain economic returns.
It’s results state: “However, as we have previously indicated, our market share of net new mortgage lending in the second half of the year was below our outstanding stock position, reflecting our continued focus on writing value-creating business.”
Lloyds TSB chairman Sir Victor Blank says the Group has delivered a strong trading performance, notwithstanding the significant recent turbulence in global financial markets.
He says: “Our higher quality, lower risk, business model has been clearly demonstrated in the resilience of our earnings stream.
“The Board remains confident in the Group’s earnings outlook and, as a result, has decided to increase the final dividend by 5 per cent to 24.7 pence per share.”