Lloyds-TSB chiefs to pocket pounds 23m profit

The 11 top executives of Lloyds Bank and the TSB are in line to make a pounds 23m profit on their shares and options as part of the pounds 14bn merger of the two banks.

Five of the most senior Lloyds' executives, headed by Sir Brian Pitman, the chief executive, are shown to be worth pounds 12m in fully paid-up shares and option paper profits. Sir Brian, alone, has accumulated pounds 4m in shares, with option paper profits worth pounds 1.8m at yesterday's closing Lloyds price of 795p.

The structure of the deal as a reverse takeover of Lloyds by the TSB means the share options for Lloyds' directors are automatically triggered. Despite this, TSB directors can exercise the bulk of their options within the next year, and would represent a pounds 7.4m profit at Lloyds' closing price last night.

Peter Ellwood, chief executive of the TSB, who is to become one of the deputy chief executives of the LLoyds TSB group, is in line for a potential option gain of pounds 2.7m. The TSB chairman, Sir Nicholas Goodison, faces a potential reward of pounds 2.3m. The unusually close bunching of the exercise dates for the directors' TSB share options has provoked speculation that the prospect of a takeover had been taken into account.

Lloyds confirmed yesterday that the 280 senior executives and 32,000 staff at the bank are free to exercise their options as they wish, although a facility is being proposed for them to be rolled over into the new Lloyds TSB bank.

A Lloyds spokesman said that there had been no pressure from Sir Brian on directors not to exercise their options. Alan Moore, deputy chief executive of Lloyds, has pounds 2m in paid-up shares and is in line for pounds 422,742 in paper option gains. David Pirrie, director of international and private banking at Lloyds, faces share option gains before tax of pounds 1.1m; John Davies, deputy chairman, is in line for share option gains of pounds 899,652; while Paul Brown, director of UK retail banking, shows paper option profits of pounds 773,871.

Even though Lloyds is clearly the dominant partner in the new bank, with 71 per cent of the pounds 14bn capital and four directors on the board to the TSB's two, the deal has been structured as the TSB taking over Lloyds. The main reason for this was the desire to preserve the trust status of the TSB and its charitable foundations, as well as to take account of the TSB's particular status in Scotland. Lloyds TSB Group plc will have its registered office in Scotland.

TSB shareholders are to retain their existing share certificates. At last night's closing value of 379p, the shares are showing a substantial gain on the value of 273.5p on 6 October, the eve of the announcement of the financial terms of the takeover. The documents stated that TSB employees and directors are to be compensated for the impact of the 68p special dividend, worth pounds 1bn in total, on the value of their share options.

Lloyds shareholders will need to exchange their existing shares. They will receive 2.704 new Lloyds TSB shares for every one of their ordinary Lloyds shares. Lloyds TSB will recommend a final dividend for 1995 of not less than 7.8p (net) per Lloyds TSB share. The approval of Lloyds' shareholders is to be sought at an extraordinary general meeting on 27 November. TSB will hold its egm two days later. If approved, the merger will then become effective on 28 December. The special dividend will be paid to TSB ordinary shareholders on 18 January.