Lloyds TSB said its underlying profits are on track to grow 11 per cent this year and it would take a "relatively limited" £200 million hit from its exposure to credit market problems.
Lloyds, the fifth biggest bank, said today it was "firmly on track" to deliver a good performance for the year and produce good economic growth, and remained confident in its earnings growth prospects over the next few years.
The bank said 2007 profits would be in line with analysts' expectations. It should report a pretax profit of £4.13 billion this year, based on the average of a Reuters Estimates poll of 18 analysts, up 11 per cent from £3.71 billion in 2006.
Lloyds said its UK retail banking and insurance and investments units had continued the strong growth trends seen in the first half of this year, but wholesale banking had been affected by a credit market crunch in recent months.
It wrote down the value of its asset-backed securities collateralised debt obligations (CDOs) by 89 million pounds and its structured investment vehicle (SIV) capital notes by 22 million.
Corporate markets' profit will also take a 90 million pound hit from a cut in the value of its trading portfolio.
It had maintained a strong liquidity position for its funding requirements and for its sponsored conduit, Cancara, the bank said. Retail and deposit inflows had been strong.
The writedowns would be more than offset by a "significant profit" on the sales of non-core businesses -- notably Lloyds TSB Registrars and Abbey Life Assurance - which had also strengthened its capital ratios and improved capital flexibility, the bank said.