British banking giant Lloyds Banking Group’s retail banking unit has reported an underlying profit of £3.22bn for the year ended 31 December 2014, up 7% from £3.01bn a year ago.

The unit’s net interest income was up 9% to £7.07bn from £6.5bn in the year ago period.

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During the year, customer deposits at the unit were up 1% to £285.5bn from £283.2bn in the prior year.

As of 31 December 2014, loans and advances to customers increased slightly to £315.2bn compared to £314.3bn at 31 December 2013 with stronger growth of 2% in the open mortgage book.

Risk-weighted assets at the unit were down by 7% to £67.7bn from £72.9bn a year ago driven by an improvement in the credit quality of retail assets and improving house prices.

The bank said that its total costs grew 7% to £4.46bn from £4.16bn a year ago driven by higher indirect overheads previously absorbed in the TSB segment and costs associated with ongoing investment in the business.

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In the retail division, the bank provided £11.9bn of lending to over 89,000 first-time buyers in 2014.

TSB, a multi-channel retail banking unit of Lloyds Banking Group has posted net interest income of £786m for the year ended 31 December 2014 and an underlying profit (loss) of £458m.

Lloyds Banking Group CEO António Horta-Osório said: "Today’s results also demonstrate that our profitability and capital position have improved significantly, and this has enabled the Board, for the first time in over six years, to recommend we pay a dividend to our shareholders.

"While we recognise we have more to do, we enter the next phase of our strategy from a position of strength. We will remain focused on our customers, embrace the digital age throughout the whole Group, continue our support for the UK economy and aim to deliver strong and sustainable returns for our shareholders," he added.