Lloyds TSB has revealed it has taken a £200 million hit as a result of the recent turmoil in the credit markets.
But in an upbeat trading update Britain's fifth-biggest bank said the impact of the ongoing global credit crunch on its business had been "limited".
Other financial institutions, including Barclays and the Royal Bank of Scotland (RBS) have both reported higher losses in the wake of the credit squeeze prompted by rising default levels in the US subprime mortgage market.
Lloyds, which said it had "limited indirect exposure" to the US subprime market, stressed the minimal impact of current market problems on its operations was the result of its "lower risk" strategy.
"The group's relationship banking businesses have sustained their strong momentum through one of the most challenging times in global financial markets for a generation," said Lloyds TSB chief executive Eric Daniels.
"Our strong underlying performance demonstrates both the prudence of our business model and the high quality, sustainable nature of our earnings," he added.
Mr Daniels also said the "relatively limited" impact of the credit market turmoil on the bank's operations had been more than offset by the "significant" profit achieved on sales of the group's non-core businesses.
In a promising forecast, Lloyds said its underlying earnings for the full-year were in line with expectations and stressed it remained confident about the group's prospects for further growth over the next few years.
However, the finance group did reveal its general insurance arm had experienced additional claims costs of approximately £110 million for the year, reflecting the impact of severe flooding in the UK in June and July.