A combination of credit crunch-induced asset writedowns and unredeemed loans contributed towards the 63 per cent fall, which means that net income for the bank stood at just $1.1 billion for January-June 2008.
This falls short of analysts' expectations, which forecast profits of around $1.7 billion.
Lloyds TSB chief executive Eric Daniels commented: "Whilst we expect arrears and impairments to increase, we believe the impact [of the crunch] on the business is manageable."
Bad loans on the bank's balance sheet increased by 31 per cent over the six months, while a total of $1 billion was also written off.
Lloyds TSB depends on mortgage and other loan repayments for much of its revenue - and has therefore been hit hard by the credit crunch and attendant British housing downturn.