The update on its Irish exposure caused Lloyds shares to fall sharply, dragging down other banks such as Royal Bank of Scotland, which is also exposed to Ireland via RBS' Ulster Bank unit.
Lloyds shares were down six per cent while RBS fell five per cent.
Ireland's economic turmoil was highlighted on Friday as credit rating agency Moody's cut the country's credit rating by five notches.
Lloyds said a further ten per cent of its £26.7bn Irish portfolio would become impaired by the 2010 year end.
It added it would increase the level of provisions against the portfolio, and expected an increase in the impairment charge relating to Irish exposures for the full year 2010 to about £4.3bn.
Lloyds said this would result in an increase in provisions as a percentage of impaired Irish loans to approximately 54 per cent at the 2010 year end.