Shares in Lloyds Banking Group were down on the FTSE 100 in morning trading after the group reported a decline in pre-tax profit in the full year 2010.

In its statutory results total income net of insurance claims was reported as being up seven per cent to £25 billion. However pre-tax profit dropped 73 per cent to £281 million. Impairments fell from £16.7 billion to £11 billion)

On a combined business basis total income net of insurance claims dropped two per cent to £23.4 billion, while the group made a pre-tax profit of £2.2 billion, following a loss of £6.3 billion in the previous year. Combined impairments declined from £24 billion to £13.1 billion.

Eric Daniels, Chief Executive of Lloyds Banking Group, said, "2010 was an important year for Lloyds Banking Group, marking our return to profitability, and a further reduction in risk in our business. Our significant progress in the year has positioned the Group well to become the best bank in the UK for all our stakeholders, including our customers, shareholders and employees."

Richard Hunter, Head of UK Equities at Hargreaves Lansdown Stockbrokers, commented, "Lloyds has made steady but unexciting progress in its announcement today, as trailed in its third quarter November update.

"Despite pain being incurred in Ireland, as was the case with RBS, and some additional difficulties in Australia, loan impairments showed a significant improvement over the previous year. Cost containment remains on track, with synergies arising from the HBOS acquisition beginning to wash through. The group claims to be taking a more prudent approach to lending, which in the UK could prove beneficial as the country moves towards an age of austerity. However, one of the investment headwinds facing the company is the lack of material geographical diversification as enjoyed by some of its rivals, such that Lloyds is seen as something of a play on the UK economy. The technical overhang of the government stake and the lack of a return to the payment of a dividend place further restrictions on the stock.

"The initial reaction to the numbers has been one of disappointment, adding to the shares' recent underperformance as compared to the wider FTSE100 - down 2% versus a gain of 16% over the last six months. The current consensus of the group as a cautious buy may come under some pressure following this update."

By 09:35 shares in Lloyds Banking Group were down 4.10 per cent on the FTSE 100 to 63.08 pence per share.