The money the bank has set aside to cover bad loans fell from £13.4bn to £6.5bn.
It says whilst lending markets have remained generally subdued throughout the industry, the group has maintained a 23% share of gross mortgage lending.
The group extended £14.9bn of gross new mortgages to UK homeowners and £23.7bn of committed gross lending to UK businesses.
Group income was primarily driven by a strong performance in retail, which recorded a 24% increase in net interest income as a result of continued migration of mortgage business onto standard variable rate products and higher new business margins as assets are priced to more appropriately reflect risk, particularly in the mortgage portfolio.
As house prices have recovered the proportion of the mortgage portfolio with an indexed loan-to-value of greater than 100% has decreased and now accounts for 9.5%.
The value of the portfolio with an indexed LTV greater than 100% and more than three months in arrears has fallen nearly £1.5bn and is now £2.5bn, representing 0.7% of the portfolio, down from 1.1% in the first half of 2009.
The group says product, process and system harmonisation is underway with the first half of 2010 seeing deployment of the Lloyds TSB model of day time cash deliveries to Halifax and Bank of Scotland branches as well as the implementation of an improved online mortgage application process for mortgage brokers.
Average LTV on new mortgage lending stands at 60.3% in the first half of 2010. The average indexed LTV on the mortgage portfolio has improved to 53.7% from 54.8%.
Retail impaired loans decreased by £0.5bn to £10.5bn compared with 31 December 2009, and as a percentage of closing loans and advances to customers decreased to 2.8% from 2.9% at 31 December 2009.
The group says the reduction in the value of impaired loans is a result of continued affordability of mortgages and fewer unsecured loans entering collections. Impairment provisions as a percentage of impaired loans reduced slightly to 33.9% from 34.6% at 31 December 2009 largely driven by increases in house valuations in the mortgage book.