Lloyds is very much back in the black after posting a profit of £1.6bn for the first half of 2010, twice as much as some analysts had forecast.The bank, which lost almost £4bn this time last year and is still 41%-owned by the government, added that total impairments more than halved to £6.5bn from £13.4bn a year ago, largely driven by the wholesale division that includes corporate markets, treasury and trading.Total income net of insurance claims grew by 5% to £12.48bn, mostly due to £6.6bn of new retail deposits. The retail business, which made a profit of £2.5bn, grew net interest income by 24% as mortgages continued to migrate onto standard variable rate products. The wealth and international business was a drag though, with impairment levels among rich Irish clients behind a £1.6bn loss for the periodLloyds will also hope that £14.9bn of gross new mortgages to UK homeowners and £23.7bn of committed gross lending to businesses will please chancellor George Osborne. But total loans had fallen £3.1bn, or 1%, since the end of 2009 due to "muted" customer demand for credit and as people pay off debt.Meanwhile, the integration of HBOS continues to "progress well", with a cost synergy run-rate of £1.08bn achieved by the end of June. The group says it's on track to hit its £2bn target by the end of 2011. There's also been further progress with its balance sheet reduction plans. Assets were cut by £23bn in the first half, taking the total to £83bn. It wants £200bn by 2014."Based on our current projection of a slow but steady UK economic recovery and current regulatory context, we believe the group has strong medium-term prospects," said finance boss Tim Tookey.Jonathan Jackson at Killik Capital says concerns remain over the ability of Lloyds to refinance its borrowing over the next two years and its exposure to the UK economy, especially commercial and residential property. "However, for investors who are comfortable with these issues, today's results are positive and highlight the group's strong competitive position in the UK retail market and the reasonable valuation on which the shares currently trade," he said.