The UK's fifth-largest bank, Lloyds TSB, has reported full-year profits before tax of £4.25bn ($8.3bn), up 11% from 2005.

Retail banking in the UK made up £1.55bn of that figure, which is 5% higher on the previous year.

The bank's impairment charge, which is the amount of money it sets aside for bad debts, jumped 20% to £1.56bn.

Lloyds said 2007 would be challenging, predicting slower growth in unsecured loans and increased regulation costs.

Bad debts

The bad debt charge suggests that borrowers are struggling to pay back unsecured loans, but Lloyds said it had seen signs of stabilization in its unsecured lending portfolio.

"Towards the end of 2006 we experienced some signs of stabilization in the rate of our customers filing for bankruptcy and a slowdown in the rate of growth in Individual Voluntary Arrangements," it said.

The bank says it is keeping costs under control with a 2% reduction in costs in its retail banking business in the UK .

Earlier this month, Lloyds announced plans to close a processing centre in Peterborough with the loss of 243 jobs.

Reporting season

Lloyds TSB is the latest UK High Street bank to report - on Tuesday, Barclays announced a record pre-tax profit of £7.14bn.

On Wednesday, Alliance & Leicester reported a 4% rise in 2006 pre-tax profits to £569m.

HBOS and Royal Bank of Scotland will both report results next week.

Source: http://news.bbc.co.uk/2/hi/business/6388707.stm