RBS and Lloyds bosses urged to decline bonuses

Lloyds and Royal Bank of Scotland, Britain's two largely state-owned banks, are expected to dole out more than £1.5bn in bonuses to staff this week, despite losing more than £10bn between them in 2009.

Pressure is mounting for Eric Daniels and Stephen Hester, the chief executives of Lloyds and RBS respectively, to waive their bonuses, following the lead taken by Barclays' bosses, John Varley and Bob Diamond, last week.

Mr Daniels could scoop as much as £6m in salary and bonuses under the terms of his contract, while Mr Hester is entitled to as much as £9.7m. But both are likely to agree to much more moderate packages in order to quell public and investor fury. Under Treasury imposed terms, neither chief executive can take cash payouts though.

It's believed that Robin Budenberg, the chief executive of UK Financial Investments, the body that manages the Government's stakes in Lloyds and RBS, will have further meetings with the banks this week to thrash out a final agreement on the size of the bonus pools to be paid to staff.

In theory, the Chancellor, Alistair Darling, could veto any proposals put forward by UKFI but an accord will be struck before any deal is announced.

"There will be a public outcry if Hester and Daniels bag big bonuses," said one investor. "They don't really have a choice but to take it on the chin. There's going to be enough anger at the bonuses being paid to staff, which in the context of the City at the moment aren't that big."

Another said: "If Daniels gets more than his basic £1m salary then it's an absolute bloody disgrace. He might think getting the rights issue done means he's worth more but he is not."

RBS, which is 84 per cent owned by the Government, reports its full year figures on Thursday, while Lloyds, in which the taxpayer enjoys a 43 per cent stake, follows on Friday.

Lloyds' performance is likely to be heavily scrutinised given the wider spread of ownership among the public and institutional investors, both of which backed a record £13.5bn rights issue last year. By raising cash from investors, Lloyds avoided having to participate in the Government's costly asset protection insurance scheme.

Mr Daniels and Sir Win Bishoff, the bank's chairman, are expected to say that impairments, or write-downs on loans primarily attributable to those inherited by the bank when it bought HBOS, could be as much as £20bn.

Nic Clarke, an analyst at Charles Stanley, said: "We will be looking to see whether Lloyds is making progress on its strategic targets, leveraging its leading position in all retail banking categories and importantly whether impairments have indeed improved in the final quarters of 2009."

Lloyds is reviewing some £70bn worth of assets it acquired from HBOS, amassed by the discredited former corporate chief, Peter Cummings. But it's thought unlikely that details of any potential sale will be spelt out.

RBS, which last year posted a £24.1bn loss, the biggest in British corporate history, is expected to say it enjoyed a modest improvement in its fortunes during 2009. Its forced participation in the asset protection scheme means that Mr Hester may give more information about any planned disposals, foisted upon the bank by the EU. RBS sold part of its Sempra commodities business last week netting £1bn.

The numbers from Lloyds and RBS will come one week after Barclays, which tapped Middle Eastern investors for support during the crisis rather than the Government, said its profits surged by more than 90 per cent last year to £11.6bn. The bank paid out £2.7bn in bonuses to its staff.

HSBC, which also avoided government support, issues its numbers on 1 March. It is expected to have a bonus pool worth more than £1.5bn.