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Lloyds, formed last year when Lloyds TSB took over Halifax/Bank of Scotland, said net profit was £596m, down from £7.1bn a year earlier when the company benefited from an £11.2bn exceptional goodwill gain on the acquisition of HBOS.
Provisions for bad loans and other losses dropped from £13.4bn to £6.55bn.
Before taxes, the bank made a profit of 1.6bn compared to a loss of £4bn a year ago and £6.3bn in the second half of 2009. Revenue was up 5% to £12.5bn.
Comparisons with 2009 assume that Lloyds had control of HBOS for all the first half.
Shares in Lloyds, in which the government holds a 41% stake after bailing it out during the credit crisis, were up 3.4% at 74.34 pence in early trading on the London Stock Exchange.
Danny Clarke, analyst at Shore Capital in London, said the bank's report was "very strong" and he upgraded his recommendation from "hold" to "buy".
Other analysts, however, noted that the absence of a dividend continues to make some investors shy away from Lloyds.
Looking ahead, the company's chief executive was upbeat about the bank's prospects.
"Based on our economic outlook and the current regulatory context we would expect to see a smaller, more productive balance sheet and are expecting returns on equity of more than 15% over the medium to longer term," CEO J Eric Daniels said.
Lloyds said it shed £23bn of assets in the first half, bringing the total reduction to £83bn since the HBOS acquisition on January 19 2009.
The bank said impairment losses in its retail division fell by 39% to £857m, helped by stabilising house prices and continued low interest rates.
Retail impairment losses as a percentage of average loan balances fell from 1.15% a year ago to 0.7%.
Wholesale impairment losses dropped from £9.7bn last year to £3bn in the first half.
- Sapa
