Lloyds Banking Group has given its chief executive an £8.5m pay deal as the bailed-out bank reported a 7% fall in profits, but also announced a special dividend payout to shareholders.
Lloyds took a £4bn charge for PPI in 2015 and has incurred a total bill of £16bn for the long-running scandal. The PPI charge forced the bank to a loss in the fourth quarter.
The bank resumed dividends a year ago for the first time since the 2008 crisis. For 2015, Lloyds will pay a full-year dividend of 2.25p per share and a special dividend worth 0.5p per share. The average investor, holding 6,000 shares, will receive £160.
The government has been gradually cutting its stake in the bank, from 43% at the time of the HBOS takeover in 2008 to less than 10% now. However, the chancellor, George Osborne, last month blamed market turbulence for a decision to temporarily abandon a plan to sell shares to the public.
After news of the special dividend the shares jumped 9% to 68.3p – but remain below the 73.6p average price at which taxpayers took a 43% stake in the bank after it bought HBOS during the 2008 crisis.
Horta-Osório was handed a 723,977 bonus in shares which he will only receive if the government sells off the remainder of its stake or the shares remain above the taxpayer break even price for 126 consecutive days.
The Portuguese banker, who took the helm in 2011 after a career at Santander, is also being handed a 6% rise in his salary, taking it to £1.12m, while staff are being handed 2%. He said the rise – part of which he was taking in shares – should be seen in the context of a 13% rise in salaries since he had taken charge.
His total pay for 2015 was reduced by £234,000 because of a £117m fine last year for mishandling compensation claims for PPI. Other senior colleagues also had their bonuses docked for 2012 and 2013. Sixty-six staff received €1m (£800,000) or more during the year.
The total bonus pool was cut to £353m from £369m and Lord Blackwell, the chairman, said: “Colleagues are rewarded in a way that recognises the very highest expectations in respect of conduct and customer treatment, and when behaviour falls below acceptable standards, it is important that accountability is taken collectively as well as individually.”
Blackwell has expressed anti-EU views but Horta-Osório would not give a personal view on the prospect of Brexit after the referendum on EU membership on 23 June. “Brexit is really important. We primarily think this is a matter for the British people and the British electorate,” he said, adding it would considered at a future meeting of the board.
On the eve of the results, bank’s chairman at the time of the HBOS deal, defended the takeover of the ailing bank during the 2008 crisis. Sir Victor Blank, who was forced to step down in 2009, was reported by the Financial Times as saying: “The only people who would argue that they suffered — and they have — is shareholders. But if I’m right that the banking system would have collapsed and been nationalised [if we had walked away] then they should be grateful.”
The results were also hit by a £837m charge to cover other potential fines and compensation claims, including packaged bank accounts, which offer insurance alongside current accounts. It said that £720m of the provision was related to products sold through the branch network.
About 45,000 jobs had been lost after the HBOS takeover and a further 9,000 are in the process of being axed after Horta-Osório announced a three-year plan in October 2014 that involved closing 200 branches.
He has delayed his targets for returns to shareholders and for cutting costs by a year, blaming the low interest environment and the eight percentage point corporation tax surcharge announced by Osborne in his July budget.
Bank shares have been pummelled this year on concerns about how they will continue to generate income while interest rates remain at historic lows.
Lloyds’ income rose 1% while bad debt charges were down 48%.
This article was written by Jill Treanor, for theguardian.com on Thursday 25th February 2016 10.40 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010