State-backed Lloyds Banking Group was under heavy fire last night after handing its chief executive a £1.5m bonus despite losing £570m in 2012.
Antonio Horta-Osorio's award was part of a £375m bonus pay-out by the loss-making bank, and produced a fresh torrent of criticism as the Government mulls selling part of its 39 per cent stake at a loss.
His bonus could yet be higher for work in 2012 because he is also a participant in the group's long-term incentive scheme, which can further enrich banking executives.
Mr Horta-Osorio's contract allows for him to make a maximum of five times his salary through various bonus schemes for work done in any one year.
News of the huge payout came on the day that the bank added a further £1.5bn of provisions to cover compensation payments to those mis-sold payment protection insurance policies, plus £400m for mis-selling interest rate swaps to small businesses.
The bank's loss was lower than last year's £3.5bn deficit but would have been much worse except for a sale of government bonds which produced a one-off gain of £3.2bn.
Lloyds' total bill for the PPI scandal has now reached £6.8bn, nearly half the estimated £15bn total for what consumer group Which? referred to as the biggest such scandal of all time.
Mr Horta-Osorio's bonus share award is not condition-free: it will only be paid in five years' time if the share price either hits the taxpayer's buy-in of 73.6p "for a given period of time" or if the Government sells at least one-third of its stake at a price above 61p.
But those conditions failed to head off fury at the award, which campaigners said was another demonstration of how out of touch the banking industry has become with the rest of society.
David Hillman, from the Robin Hood Tax campaign, said: "It can't be right that for the second time in two days a bailed-out bank is paying hundreds of millions in bonuses despite making losses.
"Victims of the PPI scandal must wish Lloyds was as quick to pay out compensation as it is to hand out bonuses to its top brass. Such gratuitous rewards show banks are out of sync with society."
That was echoed by Which? executive director Richard Lloyd who said: "Justifiable levels of pay and bonuses, individual accountability, and properly enforced professional standards are urgently needed to change the culture of banking. 2013 must be the year that we finally see big changes in banking, with banks that work for customers, not bankers."
And the Unite union's national officer, Dominic Hook, said: "Lloyds is still making a loss and it's tainted by scandal. There is no justification for Antonio Horta-Osorio's share pot."
Mr Horta-Osorio said: "When I came to Lloyds my main objective was to get the taxpayers' money back. I am very confident that we are going to do that."
The chief executive, who took two months off work after suffering extreme fatigue two years ago, said he had asked that his bonus be made conditional on the share price hitting the figure at which the taxpayer bought in.
And his chairman, the City veteran Sir Win Bischoff, said: "Whilst Lloyds Banking Group continues to show restraint in its annual bonus awards, we believe our employees should be rewarded for their contribution to the further strengthening of the business in 2012."
Price poser: controversy over 61P-a-share target put on exit
Controversy reigned last night over the 61p figure rumoured to be the price at which the Government will kick-start a sell-off of its share in Lloyds Banking Group.
While UK Financial Investments said no decision had been made, it was set as a target by Lloyds boss Antonio Horta-Osorio and his bonus is linked to a sell-off at that price, with the agreement of the Government.
Investec's analyst Ian Gordon, however, described the number as "contrived" pointing out that the taxpayer's actual buy-in was 73.6p.
UK Financial Investments, which oversees the taxpayers' stake in the bank, says the price would be lower if fees related to its agreeing to underwrite Lloyds' rights issue in December 2009 are taken into account. They amounted to £381m, which it says would take the buy-in down to 72.2p.
Lloyds also paid the Government £2.5bn to get out of the asset-protection scheme insuring its bad debts. That takes the buy-in down to 63.1p.
But critics say no normal investor would offset legitimate underwriting fees and what amounts to an insurance premium from the value of an investment. So the buy-in is 73.6p, and a sale at anything lower represents a loss to the taxpayer.
The TUC argues that allowing Mr Horta-Osorio's bonus to be linked to the lower number is wrong-headed on the part of the Government given he would have accepted 73.6p.Reuse content