Lloyds under attack despite return to profit
Eric Daniels, the chief executive of Lloyds Banking Group, will quit the role next week with a £1.45m bonus having steered his company firmly back into profit in 2010.
Mr Daniels is due to hand over the chief executive's office to Antonio Horta-Osorio, formerly the boss of Santander in the UK, on Tuesday, though he will stay on in a consultancy role. Yesterday, he said Lloyds had "achieved a step change in our financial performance" during 2010, as he unveiled pre-tax profits of £2.2bn for the full year, compared to a loss of £6.3bn in 2009.
The outgoing Lloyds boss also insisted he had no regrets about the takeover of HBOS, agreed at the height of the credit crisis in 2008, despite the huge impairment charges to which the acquisition exposed it.
However, despite the strong headline profits, anxiety about the small print of Lloyds' results continued to dog the bank yesterday, with its shares falling by more than 4 per cent – making it the worst performer in the FTSE 100 Index.
While bad debt charges fell 45 per cent to £13.2bn last year, analysts noted there had been a serious deterioration during the second half of the year, with Irish losses rising sharply.
Moreover, the £2.2bn pre-tax profit figure excludes the £500m provision Lloyds announced last week for customers badly advised on Halifax mortgages, as well as £1.7bn of integration costs and further accounting adjustments of more than £1bn. Though these were partially offset by a pension accounting gain, the Bank's statutory profit was just £281m. A £320m loss was attributable to shareholders.
Concern also remains over Lloyds' funding, with banks under pressure to repay the emergency support advanced by the Bank of England and other authorities during the financial crisis. Some £61bn was paid back last year, Lloyds said, plus another £13bn in the first two months of this year, but it still has to return more than £80bn by the end of 2012, which is likely to put a strain on its abilities to lend.
Ian Gordon, an analyst at Exane, said the cost of the HBOS deal, from which so many of Lloyds' problems stemmed, was still being felt. "The true horrors of the acquisition can never be unwound," he warned.
There was also fresh criticism of Mr Daniels's bonus, though it will be paid in shares that cannot be cashed in for at least three years. Only then will the Lloyds boss decide whether or not to accept the money, he said.
David Fleming, a senior official at the trade union Unite, said the payment was insensitive in the context of the job-loss programme Mr Daniels has presided over since the HBOS takeover. "The greedy Lloyds bosses have sacked over 21,000 of their staff and awarded their outgoing bosses £1.45m in bonuses," he said.
Despite the concerns, however, Mr Daniels said he was proud to have restored the bank to financial health and that it had been an "honour and a privilege" to serve as chief executive.
"We achieved a step change in our financial performance despite modest economic growth, returning the group to profitability, while absorbing the substantial costs of reducing risk in the business," he said.
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