Lloyds TSB has revealed that losses from investments linked to the US sub-prime mortgage crisis will cost it £200m in the current financial year.
A lower-risk strategy has insulated the bank from the credit crunch
But in an upbeat statement, the UK bank said it expected full-year profits to be in line with analysts' expectations, despite the sub-prime hit.
It attributed the limited effect of the credit crunch to a lower-risk strategy than that of UK rivals.
Barclays and Royal Bank of Scotland (RBS) have both reported higher losses.
Lloyds TSB's chief executive Eric Daniels said the "relatively limited" write-down was based on losses that occurred in the four months until the end of October.
In that time, tumbling house prices in the US and rising mortgage defaults among the nation's riskiest borrowers meant that loans to which the UK bank was exposed were worth less than they thought.
However, it reassured investors that the group remained on track to "deliver a good performance for the year", adding that it remained confident in earnings prospects for the foreseeable future.
"Whilst no bank has been immune from the recent turbulence, the relatively limited impact of the market dislocation on the group has been more than offset by the significant profit on the sales of non-core businesses," said Lloyds TSB chief executive Eric Daniels.
The sale of Lloyds TSB Registrars and the Abbey Life insurance business will add an extra £675m to pre-tax profit in the second half of 2007.