Lloyds is to pay its first dividend since the financial crisis but faces a growing controversy over the huge rewards handed to its executives as a result, including £11.5m to boss Antonio Horta-Osorio.
The taxpayer-supported bank will pay out 0.75p a share – disappointing some analysts who had hoped for 1p or more – the first such payment to its army of 3 million shareholders since February 2008.
The Treasury, which has cut its stake in the bank from 40 per cent to 24 per cent, will receive £128m of the total £535m pay out and the bank said it was targeting paying half its “sustainable earnings” out over the “medium term”.
Profits grew to £7.8bn, up 26 per cent, on an underlying basis. Even after PPI compensation (provisions rose by another £700m to £12bn) and other one-off charges the bank still recorded a statutory pre-tax profit of £1.8bn against a loss of £400m in 2013.
Lord Blackwell, the bank’s chairman, sought to defend payments totalling £30m to the 11 member management team installed when Mr Horta-Osorio took over in 2011.
He said: “We should honour commitments when it comes to rewarding success. I don’t think anyone disputes the scale of the turnaround [at Lloyds].
“Clearly there is a lot to do but the scale of the turnaround deserves to be recognised and that is largely due to Antonio and the team he has brought in to make that happen.”
Mr Horta-Osorio said: “It’s not up to me to judge. That is for you and everyone else to judge my pay against my performance.
That didn’t satisfy critics of the banking sector, however. David Hillman, a spokesperson for the Robin Hood Tax campaign, said: “It’s good news that Lloyds is returning to rude health but that’s tarnished by the need for a part state-owned bank to pay its CEO such lottery-sized awards.
“It shows a sector that lacks any restraint and, as scandals continue to come thick and fast, the Government must get a grip and bring the sector back in line.”
Labour’s Treasury spokesperson Cathy Jamieson also said that people would be “rightly taken aback” given that the bank is still state supported.
Annual bonuses for 2012 and 2013 have been frozen for the executive committee pending the outcome of a Financial Conduct Authority investigation into Lloyds’ PPI review.
The Chancellor, George Osborne, however described the results as “good news not only for taxpayers, who will get at least another £100m from the dividend, but also for millions of savers who hold Lloyds shares or have money invested in Lloyds through their pensions”.
Not everyone was pleased, however. Kames Capital’s fixed-income manager Alexander Pelteshki has questioned whether it is appropriate for Lloyds to restart dividend payments when it has still not made good on skipped coupon payments on some bonds.
“If Lloyds treats bondholders shabbily like this, it may find they are reluctant to back future issues,” he warned.
The Treasury was also under fire for wrongly telling investors the bank had permission to redeem high-yielding bonds at below their market value.
The Treasury has got back £8bn through Lloyds share sales from £20bn invested.