HBOS chief earns £500,000 bonus as profits slump

The Chief executive of banking giant HBOS earned a £500,000 bonus last year as the group's founding merger between Halifax and Bank of Scotland triggered a short-term bonus scheme even though annual profits sank.

James Crosby's total pay rose 56 per cent to £1.1m during 2001, after his salary was raised to £600,000 in May.

All former Halifax executives received a payout equivalent to 82.5 per cent of their basic salary under Halifax's short-term bonus scheme, which sets targets for earnings per share, return on equity and pre-tax profits. Last month HBOS reported earnings per share down 7 per cent in 2001, with pre-tax profits sinking £38m to £2.63bn A spokesman said the bonuses reflected HBOS's exceptional share price since the merger, which was completed in September. "HBOS has been the best performing of the major banking and insurance stocks. The [remuneration policy] strikes a balance between the short term and the long term."

Halifax's long-term bonus scheme has yet to pay out a penny because no executive has met its criteria since the company demutualised and floated in 1997. The scheme reviews performance over three years. Ordinary employees of the group participate in a similar mix of long and short term incentive schemes. Mr Crosby has elected to take his bonus entirely in shares, qualifying him to receive half as many shares again.

Former Bank of Scotland executives fared less well, receiving a short-term bonus worth 52.5 per cent of salary. After the merger, no share options were granted under BoS's long-term incentive scheme. Executives instead received a cash payment equivalent to 5 per cent of salary.

HBOS deputy chairman and former Bank of Scotland chief Peter Burt saw his pay rise 46 per cent to £994,000.

The awards are the latest in a round of pay rises for banking executives that has triggered fresh accusations of fatcattery. Matt Barrett, the chief executive of Barclays, has secured a three-year deal including a £1.1m basic salary, £990,000 pension contribution, and a bonus worth up to £1.1m.