Lloyds TSB, the UK's fifth-largest bank, said today that it was taking a higher-than-expected £201 million hit on its exposure to the credit crunch, as it laid bare the extent of its exposure to highly structured investment markets.

Lloyds TSB, which tried to buy the stricken mortgage bank Northern Rock after it ran into difficulties, had been expected to suffer credit-related writedowns of about £150 million.

The collapse of confidence in US mortgages and funding problems in structured investment vehicles (SIVs) have unleashed carnage in the credit markets, prompting big writedowns at some of the UK's biggest banks, including Royal Bank of Scotland and Barclays.

Lloyds TSB wrote down the fair value of its holdings of asset-backed securities by £89 million, leaving a residual exposure of £130 million.

It said that it had no direct exposure to the American sub-prime mortgage markets.

Lloyds TSB said that it had also written down £22 million of its £100 million investments in SIVs.

On top of this, the bank said that it had taken a £90 million pre-tax loss in its corporate markets business, taking its total writedowns and credit related losses at £201 million.

It said that its exposure to Cancara, a vehicle it uses to raise short-term funding in the asset-backed commercial paper markets, was £11.8 billion, of which £8.4 billion represented asset-backed securites. The bank said that it managed these investments in a "very conservative manner".

Lloyds TSB maintained that it had plenty of liquidity facilities to borrow in the short-term lending markets, which have effectively shut for the rest of this year.

The bank, which operates one of the leading household insurers, also revealed that flood claims costs had almost doubled to £110 million in the second half in the wake of the torrential rain that hit the UK in both June and July.

As he delivered the bank's last trading update of the year, Eric Daniels, the chief executive, described the past four months as "one of the most challenging times in global financial markets for a generation".

But he said that the impact of the market turmoil, which first began in June, had been more than offset by profits from selling non-core businesses and the continued rude health of its retail bank.

Mr Daniels said that he was confident of the bank's growth prospects "over the next few years".

Shares in Lloyds TSB, which had been seen as the least exposed to the market downturn, gained 5p to 493p. Friday's 488p close valued the bank at £27.5 billion.

Keith Bowman, an analyst at Hargreaves Lansdown, said that while the writedowns were "relatively small", profits progress at Lloyds TSB was being driven by selling off assets rather than successful operations on the high street.

"Lloyds TSB has reported no liquidity problems and remains comfortable with its capital position," analysts at Citigroup said. They noted that Lloyds TSB had been forced to pay out £36 million in relation to unauthorised overdraft fees.

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