Lloyds chief will take £1.7 million bonus

Friday 14 February 2014

Lloyds Banking Group boss Antonio Horta-Osorio has confirmed he will take a £1.7 million shares bonus and hand out £395 million to staff after the group returned to bottom line profit for the first time in three years.

The chief executive of the taxpayer-backed bank defended the decision as he dubbed Lloyds "a normal bank" thanks to turnaround efforts following its £20.5 billion bailout at the height of the financial crisis.

The move comes despite pressure on the group to cut bonuses after it was left counting the cost of past misdemeanours, recently revealing another £1.8 billion in payment protection insurance (PPI) provisions and a record £28 million fine for paying staff ''champagne bonuses'' that drove mis-selling. Mr Horta-Osorio's counterparts at Barclays and Royal Bank of Scotland have already waived their entitlements to bonuses for 2013.

Lloyds said Mr Horta-Osorio's windfall is deferred for five years and is dependent on the Government selling another 50% of its remaining 33% stake or the share price holding above 73.6p - the average price paid by the Government when the bank was rescued - consecutively for six months. He recently landed a bonus worth more than £2 million for 2012, which was similarly linked to shares remaining above 73.6p.

Details of the payouts were revealed as Lloyds confirmed statutory profits of £415 million against losses of £606 million in 2012 - its first bottom line profit since 2010. This came despite its soaring bill for mis-selling compensation, which was revealed alongside headline profit figures in a shock update earlier this month. Underlying profits more than doubled to £6.2 billion in 2013, with provisions such as PPI stripped out.

Unions attacked Mr Horta-Osorio's refusal to forgo his annual bonus.

TUC general secretary Frances O'Grady said: "With Lloyds still owing billions to the taxpayer and the amount it has had to set aside for PPI mis-selling rising by a whopping £1.8 billion, now is not the time for its chief executive to be taking a multimillion-pound bonus."

Unite said the handout was a "kick in the teeth to the taxpayer, and to hard-working staff who don't know if they will be next in line for the chop from one day to the next".

Its wider staff bonus pool will also stoke controversy after being raised by 8% on the £365 million paid out for 2012 and coming days after Barclays defied calls for pay restraint with a 10% hike in its pot to £2.4 billion. The payout means the majority of Lloyds staff - around 91,000 employees - will receive payouts averaging £4,500 each, although cash handouts are capped at £2,000 and bonuses are fully deferred for directors.

Mr Horta-Osorio said the bonuses reflect " excellent progress" over the last year.

Lloyds said there had also been a "material" reduction in the staff bonus pot to reflect mis-selling provisions and December's fine, while the group's remuneration committee is due to discuss the clawback of past payouts to individuals relating to the Financial Conduct Authority penalty at the end of last year.

It has yet to decide whether to ask shareholders to approve the maximum level of bonuses - set at double annual salary - under the new EU rules to cap payouts, which came into force on January 1 and apply from this year onwards.