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.
This was well down on £4.4 billion 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 £905m.
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 over the year to £14.4 billion.
Horta-Osório said the bank would increase funds from insurance and wealth customers by £25 billion 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.
HSBC also 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 by the end of this year and it would invest £900m on digitising more of its services.
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.
HSBC executive Charlie Nunn is set to replace Horta-Osório, starting in August.
Similar to the situation at rivals HSBC, NatWest and Barclays, Lloyds' profits were dented by bad loan provisions.
Lloyds set aside £4.2 billion to cover loans expected to sour, although this was less than the £4.5-5.5 billion range previously given.
Lloyds' chief financial officer William Chalmers said the pace of Britain's vaccine rollout and the government's roadmap to phase out lockdowns were encouraging and paved the way for better UK growth than the 3% core forecast by the bank for 2021.
The bank said it would pay a 0.57 pence dividend per share, the maximum allowed by the Bank of England and above a forecast of 0.53 pence.
Chalmers said the bank would consider an interim dividend halfway through the year and revert to a "stable dividend policy" from next year depending on economic conditions.
The bank said it grew its mortgage book by £7.2 billion, as it capitalised on a pandemic-driven boom in home sales.
The bank's core capital ratio, a key measure of financial resilience, increased to 16.2% compared to 15.2% in September.
Costs for past misdeeds chipped into profits, including an £85m charge for processing delays on a final batch of mis-sold payment insurance claims and £159m for compensation and costs for historic fraud at its HBOS Reading branch.
Horta-Osório's pay package for 2020 fell to £3.4m, after he and other executives waived bonuses for the year due to the pandemic. He was paid £4.7m the previous year.