The lender, which includes Bank of Scotland and Halifax, said its open home loans book edged 0.4% lower to £298.5bn over the last 12 months, while its closed book fell 34% to £7.7bn.  

In its full-year statement, it added that the reductions were due to “the impact of securitisation of £2.5bn of legacy retail mortgages (including £2.1bn in the closed mortgage book) during the first quarter of 2023 and £2.7bn of Retail unsecured loans in the fourth quarter of 2023”.  

The bank said its net interest margin – the difference between what it pays to savers and takes in from lenders – lifted by 17 basis points over the year to 3.11%.  

It added that its margin “benefited from UK bank rate increases and higher structural hedge earnings from the rising rate environment, partly offset by expected headwinds due to deposit mix effects and asset margin compression, particularly in the mortgage book”.  

However, the business added that it expected three interest rate cuts from the Bank of England this year. The central bank’s base rate is currently 5.25%.   

The bank also set aside £450m to cover the potential cost of an investigation into car finance deals launched by the Financial Conduct Authority last month.

Lloyds Banking Group chief executive Charlie Nunn said: “The group delivered a robust financial performance, meeting our 2023 guidance, driven by income growth, cost discipline and strong asset quality.   

“This performance enabled strong capital generation and increased shareholder distributions.”