Lloyds Banking Group says it is to expand its insurance and wealth businesses as rock bottom interest rates and bad loan provisions take their toll on profitability.

The bank, which returned to private hands in 2017 following its taxpayer bailout during the financial crisis, revealed a 72% slump in pre-tax profits for 2020.

Much of the hit came from a £4.2bn charge for loans that are expected to sour as a result of the COVID-19 crisis, though the figure came in below the bank’s previously guided range.

Like HSBC 24 hours earlier, Lloyds said it would further cut costs through a reduction in office space – by a fifth over three years – in the wake of a review which led to a string of job cut announcements as the pandemic took its toll last year.

The bank, which is the UK’s largest mortgage lender, said it would increase funds from customers in insurance and wealth by £25bn by 2023 as loan returns creak as a result of record low interest rates.

Like its main UK rivals, Lloyds said it would resume dividend payments – blocked last year by the Bank of England – with a 0.57p-per share award.

It also confirmed that Charlie Nunn, an HSBC executive previously announced as successor to Antonio Horta-Osório, would take over in August.

Mr Horta-Osório, who has overseen the post-crisis recovery of Lloyds, is leaving after a decade and plans to become chairman of Credit Suisse.

He told investors the bank was focussed on contributing to a sustainable economic recovery from the virus crisis.

“The group’s unique business model, customer focused strategy and transformation in recent years positioned us well to respond effectively to the needs of our customers in 2020,” he said.

“At the same time, the group’s financial performance in the year has been impacted by the pandemic.

“We are now seeing positive developments in the business, including growth of £10.2bn in the open mortgage book in the second half of the year and total deposits up £39bn in the year, the latter given curtailed retail spending and inflows to our trusted brands.”

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