Lloyds Banking Group’s black horse jumped back into £2.2 billion profit for the 2010 full year period, up from a £6.3 billion loss in 2009.

Total impairment charges (covering loan defaults) within the combined businesses as a percentage of the overall loans made fell from 3.25 per cent in 2009 to 2.01 per cent in 2010.

However, total income, including insurance claims dropped from £23.9 billion to £23.4 billion.

Analysts said they were disappointed at the bank’s net interest margin – the difference between interest paid to depositors and what is received from those taking loans - which stood at 2.1 per cent, up slightly from 1.8 per cent in 2009.

The group’s core tier one capital was healthier, however, up at 10.2 per cent from 8.1 per cent in 2009 while the tier one capital ratio grew from 9.6 per cent in 2009 to 11.6 per cent in 2010.

Eric Daniels, outgoing chief executive of Lloyds Banking Group, said the return to profitability came as the business had simultaneously reduced its risk levels.

He added, ‘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.’

Despite Daniels’ positivity, the bank remains 41 per cent owned by UK tax payers.