Boardroom bonuses at loss-maker Abbey

Abbey National, which has posted massive losses for the past two years, paid its chief executive and finance director bonuses that were equal to more than 100 per cent of their salaries last year because it felt they delivered "exceptional" performance.

Abbey National, which has posted massive losses for the past two years, paid its chief executive and finance director bonuses that were equal to more than 100 per cent of their salaries last year because it felt they delivered "exceptional" performance.

Luqman Arnold, Abbey's chief executive, received £1.69m, of which £1m was a bonus in cash and shares. Stephen Hester was paid £1.2m, including £676,000 in bonuses. Both also received pension contributions, of £236,250 for Mr Arnold and £182,000 for Mr Hester.

Abbey said its remuneration committee decided to award bonuses above its usual maximum of 100 per cent of base pay because it felt the two had dramatically exceeded expectations in cutting the liabilities of the group and putting it on sound footing for the future.

The bank slumped to a loss of nearly £1bn in 2002 after a black hole emerged in its wholesale bank, created by risky loans taken on by its previous management under Ian Harley. Mr Harley left Abbey in 2001 with a £1.7m pay-off.

Abbey reported two weeks ago that its loss narrowed to £686m last year, as it sold off risky parts of its business and concentrated on core personal financial services, such as mortgages and savings. Its remuneration report, published yesterday, also showed Lord Burns, its chairman, received £450,000 in 2003. He is rumoured to be in the running to become the chairman of the BBC, which pays £80,000 a year.

The bank also paid special allowances to Angus Porter and Priscilla Vacassin, who joined as directors last year, to compensate them for benefits lost at their previous jobs.

Mr Arnold, a former investment banker at UBS, joined Abbey in October 2002.

He has invested heavily in the shares of the bank, spending £1.7m on its stock. That is more than he has received in pay, net of tax, of £1.3m.