Lloyds is to approach regulators for permission to pay dividends in the second half of this year in what Mr Horta-Osorio said was a symbol of its return to being a "normal bank" following its near collapse in 2008 as it undertook the rescue takeover of Halifax Bank of Scotland.
Lloyds has said that over the medium term it will seek to pay out at least half of sustainable earnings in dividends to shareholders, including three million private investors.
Mr Horta-Osorio said this would make Lloyds the most generous dividend payer among the UK banks.
But he cautioned: "It will depend on loan growth. If the UK economic recovery grows more and loans grow more we will have to retain more of these profits to sustain loan growth for higher dividends in the future.
"It depends on how quickly the economic recovery takes place in the UK."
His comments suggest that the government faces a quandary if it is seeking the early disposal of its remaining 32.7% stake in Lloyds. Higher dividends would make Lloyds more attractive to investors but loan growth supports the economic recovery.
Mr Horta-Osorio indicated that he was keen for Lloyds to return to full private ownership.
"If the market conditions continue as they are, we are ready to do whatever the Treasury and UK Financial Investments (which manages taxpayers' bank stakes) want to do," he said.
Justin Cooper, chief executive of shareholder solutions at Capita Asset Services, said: "With the payout to be at a 'modest' level, Lloyds will remain a shadow of its former dividend might.
"In 2008, Lloyds paid £2.3 billion in gross dividends. Investors are likely receive a fraction of that amount for the next few years."
Responding to Labour Party proposals to break up banks perceived to be too dominant, Mr Horta-Osorio said: "The UK market is very competitive and you should not confuse concentration with competition."
Even once it disposes of TSB, which contains what was Lloyds TSB Scotland, Lloyds will have a 25% share of UK current accounts via brands such as Bank of Scotland.
But Mr Horta-Osorio believes there could be reform of the small business market, in which Lloyds is the market number three behind Barclays and RBS with a 21% share, "Maybe that market could be improved further," he said.
Small business banking is being investigated by the Office of Fair Trading.
Lloyds grew its net lending to small businesses by 6% last year in the face of a declining market.
There are now around 17,000 Lloyds employees in Scotland, including 2000 at TSB, which is due to be floated on the stock market this year. This is down from 20,000 at Lloyds TSB's merger with HBOS.
Mr Horta-Osorio said Lloyds would continue to focus on costs to finance its expansion in sectors where it is relatively weak such as credit cards.
Its commitment not to close the last bank branch in a community expires at the end of this year.
Mr Horta-Osorio said Lloyds, whose registered headquarters are in Edinburgh, has done no planning in relation to September's independence referendum. "We will consider the outcome of the vote," he said. "We would have 18 months to do this."
Lloyds expects to complete the
sale of Scottish Widows Investment Partnership to Aberdeen Asset Management during this quarter, it said.
Mr Horta-Osorio confirmed that Lloyds is protected from the recent fall in Aberdeen's share price because the share component has a 420p floor. Any shortfall will be met by Lloyds being given more Aberdeen shares.
Lloyds paid out £395m in bonuses last year, up 8% on 2012, including a £1.7m award to Mr Horta-Osorio. His bonus will be paid in shares and is deferred for five years.
He said that the decision of the bosses of Barclays and 81% state-owned RBS to waive their 2013 bonuses were "personal decisions" and that the pay-out took account of the extra £3.5bn in provisions Lloyds made last year to compensate customers for mis-selling.
Lloyds made a statutory pretax profit of £415m for 2013, up from a loss of £606m in 2012.