Annual loss at Lloyds rises to £3.5bn after PPI scandal

Taxpayer-owned bank rules out more job cuts but senior executives' bonuses slashed by 50 per cent

Lloyds Banking Group lost £3.5bn last year, but the taxpayer-owned bank said it was in a "much stronger position" than it was 12 months ago.

Its chief executive, Antonio Horta-Osorio, cautioned that 2012 would be very challenging "with a subdued economy, continued, high-regulatory scrutiny and political uncertainty relating to the banking sector".

Mr Horta-Osorio, who took eight weeks' sick leave with extreme exhaustion at the end of last year, once again said the bank would not hit some of the targets he had set for 2014 because of the slowing economic backdrop.

"This is not a profits warning," he declared. "And we have identified an extra £200m of cost savings which will take the total savings to £1.7bn by 2014."

Lloyds said it did not expect the extra savings to come from more job cuts on top of the 15,000 it announced in the autumn. It said 3,700 of those involved had left the bank already.

But David Fleming, of the trade union Unite, said: "28,000 totally innocent Lloyds Banking Group employees have lost their jobs due to the poor management of this finance institution. It is vital that Lloyds stops attempting to make scapegoats out of its workforce to make short-term cost savings. Instead they must recognise the ongoing commitment of those who day in, day out, deliver world-class customer services on their behalf, not simply rewarding the city bankers."

Lloyds' annual loss compares with a £281m profit made in 2010, and comes after it took a £3.2bn hit on mis-selling payment protection insurance. That was the highest cost for any UK bank and was a decision taken by Mr Horta-Osorio after he took over from Eric Daniels as chief executive last year.

The bank's total income fell by 17 per cent to £20.8bn. Bad debt provisions declined 26 per cent to £8.1bn, with Ireland – much of it inherited from HBOS, which it rescued during the financial crisis – accounting for £3.2bn of that. Lloyds said it had paid back £97bn of cheap facilities from governments and central banks last year, reducing the total to £24bn. It has repaid all the money it took under the Bank of England's special liquidity scheme.

Its total bonus pool fell by 30 per cent to £375m, and Lloyds said that senior executives' bonuses would be 50 per cent lower than in 2010. Mr Horta-Osorio has already said he will not take a bonus this year after being off sick, while Lloyds is also looking to claw back £1.5m of earlier executive bonuses – including £580,000 from the former chief executive Eric Daniels – because of its PPI mis-selling.

Bonus pools at RBS and Barclays were £785m and £2.2bn respectively.

Mr Horta-Osorio said that disposal of just over 600 branches as ordered by the European Commission under its state aid rules was "progressing well." The Co-op Bank is the exclusive bidder with an offer of about £1bn, and he expects the deal to complete this year.

Richard Hunter, the head of equities at Hargreaves Lansdown stockbrokers, said the bank's outlook comments "provide little reassurance, with the company predicting a similarly tough year ahead as they continue to concentrate on tidying up the balance sheet".

Shares in Lloyds closed down 0.845p at 35.73p yesterday.

Levy Shortfall

George Osborne's target of raising £2.5bn through the UK bank levy could be under pressure after Lloyds yesterday became the third of the big banks to say it paid less than the City expected.

Lloyds' share of the levy was £189m, Barclays paid £325m, Royal Bank of Scotland £300m and HSBC has been suggesting it will have paid £380m when it reports on Monday.

That is a total of £1.2bn or just under half the Chancellor's target. He has already tweaked the levy up from 0.075 to 0.088 per cent in the autumn because the banks had reduced the size of their balance sheets faster than expected.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Jerry Seinfeld Comedians in Cars Getting Coffee
peopleSitcom star urges men to be more supportive of women than ever
Life and Style
Living for the moment: Julianne Moore playing Alzheimer’s sufferer Alice
Jay Z
businessJay-Z's bid for Spotify rival could be blocked
footballLouis van Gaal is watching a different Manchester United and Wenger can still spring a surprise
The spider makes its break for freedom
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot