Lloyds warns of more job cuts despite £1.6bn first-half profits

The comments came as the part-nationalised bank reported a much better than expected 1.6bn profit for the first half of 2010 – its first profit in two years and a massive improvement on last year's 4bn first-half loss.

The group is now half-way through its three-year integration of Halifax Bank of Scotland.

Over the past 18 months 16,000 posts have gone across the two banks, of which 12 per cent have been compulsory redundancies.

Lloyds refused to be drawn on how many more jobs will be axed but head of banking Helen Weir said the focus over the next 18 months would be on integrating systems rather than eliminating duplicate roles.

She said the Halifax operation was a core part of the business and was unlikely to be hit hard.

"Halifax has not seen that much of an impact in terms of job losses and we expect that will continue going forward," she said.

"The Halifax operation is going well, it's a great brand and a core part of our strategy."

She added that it had seen a lower turnover in staff compared with the rest of the business.

"Our employees in Yorkshire are highly skilled and have a real passion for the business. They are very loyal to Halifax," she said.

She was speaking yesterday as Lloyds said it expects to deliver a strong performance as the UK economy recovers.

Chief executive Eric Daniels said he expects to see a gradual recovery in the UK economy and fears of a double dip recession have receded.

The half-year results represent a dramatic turnaround for Lloyds, which was bailed out by the taxpayer during the credit crisis.

The taxpayer still owns 41 per cent of the company and Mr Daniels said it was up to UKFI, the organisation that monitors the taxpayers' stakes in banks, to decide when to sell the stake.

"Our job is to make Lloyds as robust as possible," he said.

But the new Government's inquiry into UK banks, which may take a year, could delay the sale.

Lloyds shares closed up 3.6 per cent last night, a rise of 2.6p to 74.5p.

The group's results were helped by a more than halving of bad debts to 6.55bn from over 13bn last year.

In terms of lending, Lloyds said it is ahead of its Government-set targets as gross lending to businesses reached 24bn in the first half.

Only 5.7bn of this was to small businesses, however, and the bank said firms were still paying back more than they were borrowing.

Lloyds was saddled with billions of pounds of losses after it bought troubled rival HBOS at the height of the credit crisis of 2008, a deal brokered by the last Labour Government.

Lloyds aims to shrink its 1 trillion balance sheet by a third by winding down or selling unwanted businesses, including a plan to sell more than 300 branches of Lloyds TSB in Scotland and Cheltenham & Gloucester in the UK.

Mr Daniels said he did not expect the sale of UK retail branches to happen in the near future: "We want to complete the integration of HBOS first," he said. "We will sell off branches after that, as this is not the best market to sell in."

Net lending to households and businesses – which takes into account repayments – dropped two per cent to 368bn and remained flat within the core businesses.

Mr Daniels said that despite borrowing rates being cheaper now than before the financial crisis, there was little appetite to borrow.