Lloyds Banking Group continued to count the cost of its HBOS takeover today after losses hit £6.3 billion and it revealed £24 billion in bad debts.
Annual figures from the organisation - 41% owned by the taxpayer - follow yesterday's £3.6 billion losses by fellow part-nationalised group Royal Bank of Scotland.
Lloyds said impairment charges shot up by more than £9 billion last year after the takeover of struggling rival HBOS.
Chief executive Eric Daniels has already announced he will give up a £2.3 million bonus to stave off another row over bank pay, but the bank confirmed it would pay a "very small percentage of revenues" to bank staff.
It is expected to hand out £200 million in bonuses, although this is far less than the £1.6 billion at RBS, as Lloyds does not have a large investment banking business.
Lloyds shares fell 6% to around 52p after the results, keeping the taxpayer's stake well under water.
The Government paid out on average 74p for its 27 million shares, leaving it with a paper loss of around £5.9 billion today.
Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said Lloyds was still paying the price for the HBOS deal at the height of the financial crisis.
"The HBOS legacy still weighs heavily on Lloyds, although these numbers do show some signs of encouragement," he said.
Lloyds has suffered due to the risky lending and commercial property interests inherited with its rescue of HBOS.
But the group today echoed comments from RBS in assuring that the worst of the impairments for toxic loans and struggling borrowers was behind it.
Second half bad debts eased by 21%, and finance boss Tim Tookey said impairment charges have "now peaked, with a significant reduction expected in 2010".
The group added that with signs of stabilisation in the wider economy, a "significant improvement" is expected across Lloyds this year.
Lloyds has been slashing costs following the HBOS deal and financial crisis, today revealing a mammoth 11,500 roles axed over the past 12 months.
It signalled possible further jobs pain today as it increased annual cost saving targets to £2 billion by the end of 2011.
While difficult to compare due to the subsequent HBOS takeover, the group said 2009 combined losses narrowed slightly on the £6.7 billion in 2008.
Within its UK retail bank, Lloyds reported savings deposits up 4% last year and a 2% reduction in loans to customers, although it said it maintained a 24% share of the gross mortgage lending market.
Unlike RBS, Lloyds has managed to avoid the Government's asset protection scheme, which would have seen the public stake rise above 60%.
The firm instead garnered support for a record UK rights issue as part of a £20 billion-plus fundraising completed in November, although bad debts are still likely to be a major millstone in the combined bank's figures.
The Government paid out £5.7 billion to support Lloyds' £13.5 billion record rights issue last year, adding to the £14.5 billion of public cash already in the bank.
In return for the state support, Lloyds has made commitments to the Government on lending, with a target of £11 billion on loans to business and £3 billion in new residential mortgages in the year to March.
Lloyds did not give any update on the targets, but has already said it is short of its business lending aims while comfortably on track to meet mortgage pledges.
Its customer services were also in the spotlight earlier this week when Financial Ombudsman Service figures showed it was the most complained about UK financial services company during the second half of 2009.
The bank has been restructuring following the HBOS deal, stripping out £766 million in annual cost savings last year - around half of its previous annual target, before today's increase to £2 billion.
Its combined retail banking operations bore the brunt of the job losses, the number of employees down by more than 6,500 on a full-time equivalent basis.
But Lloyds said many of the group's jobs had gone through natural turnover, while it redeployed staff where possible.
The bank is also shedding parts of its operation to meet conditions imposed by the European Commission in return for public support.
Lloyds has made five disposals of non-core businesses, such as online insurer esure, since last summer, but the EC has ordered it to sell 600 branches - including the TSB brand, Cheltenham & Gloucester, Lloyds TSB's branches in Scotland and some in England and Wales. This represents around a fifth of its UK network.
On a statutory basis, today's figures showed Lloyds booked an £11.2 billion "goodwill credit" on its balance sheet from the HBOS business, which it said was bought for significantly less than its book value.
Its £6.3 billion losses do not take this into account, but when included the group said it made pre-tax profits of £1.04 billion.
Jonathan Jackson, head of UK equities at Killik & Co, said: "Although we look to be past the worst for the banking sector, uncertainty remains over the prospect of regulatory change."
Prospects at Lloyds are also closely linked to the economic recovery and the bank therefore remains a "very high-risk investment", he added.