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
Jamie Oliver turned down the offer of playing a hobbit in the movie adaptation of the book by JRR Tolkien, the TV chef has revealed.
Children are being put at risk as 11% of posts for permanent children's social workers remain unfilled, experts have warned.
A Network Rail boss who presided over the Christmas trains chaos will not receive a bonus of more than £300,000 when he leaves in February