Lloyds Banking Group has revealed a 72 per cent slump in annual pre-tax profits in 2020, to £1.2billion, as earnings are hit by weak rates and the prospect of a surge in sour loans.

The bank, which has a base in Barnwood, has set out plans to expand its insurance and wealth businesses in a drive for further profitability.

Although lower than expected, the biggest hit to profit is said to have come from a £4.2bn charge for loans that are expected to sour as a result of the coronavirus crisis.

It said it is looking to further cut costs within the business through office space reduction, by a fifth over the next three years.

Despite the drop in profits, shares rose 4 per cent at open this morning and Lloyds said it would resume dividend payments following similar announcements from rival banks.

CEO Antonio Horta-Osório said: ""The group's unique business model, customer focused strategy and transformation in recent years positioned us well to respond effectively to the needs of our customers in 2020.

"At the same time, the group's financial performance in the year has been impacted by the pandemic.

"We are now seeing positive developments in the business, including growth of £10.2bn in the open mortgage book in the second half of the year and total deposits up £39bn in the year, the latter given curtailed retail spending and inflows to our trusted brands."

It was also revealed that Mr Horta-Osório would leave his position in August after a decade with Lloyds, and HSBC executive Charlie Nunn would become his successor.