The FTSE 100 Index fell 117.9 points, or 2.1%, to 5533.9 amid worries that a raft of Spanish regions were poised to ask for government bailout funds, increasing the likelihood that the country itself will turn to the EU for help.
The fall wiped nearly £30 billion from the value of London's leading shares index, with all 100 companies losing value and banks falling up to 4%.
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Last year, Lloyds more than doubled the £1.64 billion pre-tax profit it reported for 2015.
The Supreme Court is to rule on whether a minimum income barrier that stops British citizens from bringing a spouse to the UK is lawful.
Dorset's Weymouth Beach has been named the UK's best by travellers, with Fistral Bay, Cornwall, coming in second place.