Lloyds, Britain's largest retail bank, said it was set for decent 2010 results as bad debts fall and margins continue to improve.
The bank, which was partly nationalised during the credit crisis, said it expects to deliver a "good financial performance" for the full year.
Lloyds, Europe's fourth biggest bank by market value, kicked off the third quarter updates from Britain's major banks, with Royal Bank of Scotland, Barclays and HSBC due to follow suit later this month.
It said losses from problem loans were "expected to fall moderately" in the second half, in line with its recent guidance, and that margins should show a modest improvement.
It added that its capital ratios were strong and slightly higher than those reported at the half-year stage, when Lloyds reported a Tier 1 core capital ratio of 9.0 per cent.
Lloyds did not disclose specific profit figures for the third quarter, but outgoing chief executive Eric Daniels said the bank remained profitable during the quarter, following on from its interim pre-tax profit of £1.6 billion.
Mr Daniels is due to step down next year and he said the company's hunt for his successor was continuing "apace".
Lloyds is 41 per cent state-owned after a bailout by the UK government which had engineered a rescue takeover of troubled rival HBOS.
As a result of the bailout, regulators have ordered Lloyds to dispose of billions of pounds worth of assets. Lloyds aims to shrink its £1 trillion balance sheet by a third by winding down or selling unwanted businesses, which includes a plan to sell 600 branches in Britain.
Lloyds, which owns Bank of Scotland Ireland, announced its intention to wind down BoSI's activities here on August 19th. It will hand back its Irish banking licence and close to deposits, current accounts and new lending by December 31st.
It has reached an agreement with the BoSI management team to administer the wind-down of its €33 billion Irish loan book.
Reuters