Lloyds Banking Group plans to re-invest a "significant proportion" of savings made through its business simplification project in improving customer service, with a focus on growing digital channels.

Since merging with HBOS in 2011, Lloyds Banking Group has undertaken a group-wide programme to simplify its operations, aiming to reduce costs and improve customer experience. This has included efforts to rationalise its IT application estate, increase automation, as well as cut suppliers by more than 7,000 to less than 10,000. The bank has also undergone a major reduction in staff headcount.

After spending £1.7 billion on the 'Simplification' strategy, the group has now realised a total of £1.5 billion in run rate savings, raising £600 million in 2013, and expects that savings will total £2 billion by the end of the year. Some of the funds made available through efficiencies will now be reinvested in upgrading digital services.

"We are reinvesting a significant proportion of the savings realised from Simplification to further improve processes and the quality of customer interaction through branches, via the telephone and digital channels," the bank said in its full year financial results for 2013.

Lloyds Banking Group also highlighted growth of its existing digital services, with 10.5 million active internet banking customers, while mobile banking users grew from 3.3 million in 2012 to over four million in 2013.

Lloyds Banking Group created a new Digital, Marketing and Customer Development function last year to spur further digital product development across all of its divisions, such as enabling customers of finance arm Black Horse to make payments via mobile devices. The group aslo invested in a new customer relationship management system for its wealth division.

Investments in legacy IT systems were also targeted with the availability, resilience and security of core IT systems highlighted as the bank's "most significant" operational risk. Last month customers of of Lloyds and TSB were unable to withdraw withdraw cash from thousands of ATMs or pay for services using credit or debit cards due to an IT systems failure, prompting an apology from the banking group.

The bank recorded its first profit since the start of the financial crisis of £451 million in its 2013 results, following a £660 million loss for 2012.