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LONDON - Lloyds Banking Group's outgoing Chief Executive António Horta-Osório set out fresh targets to expand the lender's insurance and wealth business and further cut costs, as the bank resumed a dividend despite a sharp fall in profits for 2020.

Britain's biggest domestic lender reported pretax profits of 1.2 billion pounds ($1.7 billion), well down on 4.4 billion pounds the previous year, after pandemic lockdowns shrank household spending and drove up provisions for bad loans.

But it still beat the average of analyst forecasts of 905 million pounds.

The strategy update showed Lloyds aimed to offset pressure on profits, including from wafer thin central bank interest rates, by axing costs further and increasing income from fee-based products such as wealth management and corporate banking.

The squeeze led net income to fall nearly 3 billion pounds over the year to 14.4 billion.

Horta-Osório said the bank would increase funds from insurance and wealth customers by 25 billion pounds by 2023 and expands its currency and rates services for corporate customers.

Lloyds will also cut office space by 20% within three years, the second British lender to unveil such plans this week after HSBC announced a 40% cut to its footprint as banks look to capitalise on remote working brought on by the pandemic.

Lloyds said its overall costs would be trimmed below 7.5 billion pounds by the end of this year and it would invest 900 million pounds on digitising more of its services.

The bank's shares were up 2% at 09.47 GMT, amid a 0.6% fall in the wider FTSE 350 index of banks.

"Faced with lower margins, higher volumes seem to be the answer for Lloyds," said Susannah Streeter, analyst at Hargreaves Lansdown.

Horta-Osório, who led a turnaround at the bank after its bailout in the financial crisis, is leaving Lloyds after a decade to stand for election as chairman of Credit Suisse in April.