The rise in profit, which was above the expectations of leading analysts, comes as a result of a strong international operation. However, profits might have been even stronger if they had not been held back by a weaker UK retail banking market.
Profits for the retail banking side of the business fell by seven per cent. This has been attributed to bad debt and a growing inability to repay unsecured loans.
Eric Daniels, the chief executive of Lloyds TSB, said: "We have seen a deterioration in the unsecured consumer lending portfolios as a result of an increase in the number of customers facing repayment difficulties."
The strong overall results for 2005 have led experts to predict Lloyds expanding into other markets but the company states it will try to rebuild operations in the UK before expanding elsewhere.
There have also been rumours Lloyds is to be taken over, with US bank Wells Fargo among the alleged bidders.