Lloyds said losses narrowed significantly from £3.5 billion a year earlier thanks to improvements in its core business.
But much of this was down to cost-cutting, as income fell 13% amid historic low interest rates.
Lloyds said it was very close to its original target to bring costs down to around £10 billion and was now hoping to cut costs even further, to £9.8 billion, in 2013.
The group added that it boosted lending to small business by 4% on a net basis and helped 55,000 customers buy their first home.
More top news
Marks and Spencer will become the first UK retailer to add vitamin D to its entire packaged bread range.
An over-the-top 80's action movie parody featuring kung fu Hitler and a David Hasselhoff soundtrack gets almost four million views online.
The government is treating the fight against obesity as a priority, as a new report cautions that one in five cancer deaths is caused by it.