It said it had "delivered a resilient trading performance against the backdrop of a marked slowdown in the UK economic environment and continued challenges in the financial markets".
The bank said it had met mortgage lending targets for the year, but would find it "challenging" to meet targets for business lending, because firms were looking to pay off debt rather than take on more.
Looking forward, chief executive Eric Daniels said: "We are building strong earnings momentum and expect our performance to improve significantly in 2010 and beyond."
Mr Daniels has declined to take his bonus entitlement of £2.3m for 2009.
Lloyds boss dodges BBC reporter
But other staff will be paid bonuses, the bank said.
"The average salary [at Lloyds] is £25,000 a year, and the typical bonus is £1,000, pre-tax," said spokesperson Shane O'Riordain.
"We believe as a matter of principle that when stretching performance targets are met there should be some proportionate financial recognition."
Lloyds took over Halifax Bank of Scotland (HBOS) in January last year.
It underestimated how many bad loans HBOS had on its books, and had to be bailed out by the government as a result.
The bank is now 41%-owned by the state, down from 43% after it raised £22.5bn of capital at the end of last year.
Lloyds pinned the blame for its huge loan losses of £24bn firmly on reckless lending by the previous management at HBOS, and on the recession driving other customers out of business.
It also revealed the massive scale of further potential losses lurking on its books because borrowers are struggling to repay their loans.
Shane O'Riordain: "It does depend which profit measure you use"
What it described as "impaired loans and advances" more than doubled in value last year and stood at £58.8bn by the end of December - amounting to 9% of all its lending.
The bank said losses crystallised last year were mainly due to "falls in the value of commercial real estate and the impact of the economic deterioration during the year, including the effects of rising unemployment and reduced corporate cash flows".
In its High Street business, higher unemployment among customers pushed up losses on bad loans to £4.3bn, although losses on mortgages fell back as house prices recovered.
In corporate lending, losses rose to £15.7bn, particularly because of the crash in commercial property values and because of other firms going under.
Lloyds also lost large sums on commercial property loans in Ireland and Australia.
On Thursday, Royal Bank of Scotland (RBS), which is 84% government-owned, reported a loss for 2009 of £3.6bn.
Last week, Barclays reported pre-tax profits of £11.6bn, although the figure was boosted by the sale of its BGI fund management arm to US firm BlackRock last year.
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