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Lloyds set to draw sting from critics with early top pay announcement

The bank hopes to avoid bonuses becoming an issue at the election

Nick Goodway,James Moore
Friday 13 February 2015 02:27 GMT
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Antonio Horta-Osorio contends that Lloyds is not too mighty and its bonus culture makes sense
Antonio Horta-Osorio contends that Lloyds is not too mighty and its bonus culture makes sense

Lloyds Banking Group is set to join Barclays and HSBC by hurrying out bonus announcements in an attempt to avoid a potential political storm before the election.

The taxpayer-backed bank is set to find itself in the midst of controversy over a potential £11m payment, including a £7m bonus, to its chief executive Antonio Horta-Osorio – agreed if he met certain targets. By bringing the announcement forward, the bank hopes to avoid it becoming an election issue, as Labour attempts to portray the Conservatives as being in the pockets of the rich.

In a break with precedent, Barclays has already opted to publish its full annual report, with pay details, on the same day as its results – 3 March. HSBC has done the same thing for several years, partly to comply with regulations in Hong Kong, where it has a stock market listing.

Royal Bank of Scotland, which is 82 per cent owned by the taxpayer, is also understood to be considering bringing forward some of its potentially contentious pay details.

In the past, bank annual reports have come out a week to a fortnight after their annual results. But this year, that would have meant releasing them just days before George’s Osborne’s pre-election Budget on 18 March.

Lloyds’ remuneration committee, headed by its senior non-executive director , Tony Watson, will not finalise pay details for some days. But he has already had meetings with James Leigh-Pemberton, the head of UK Financial Investments (UKFI), which holds the taxpayer stake on behalf of the Government. Mr Horta-Osorio’s £7m share-based bonus from his 2012 long-term incentive plan got the nod largely because it is part of his contract and reflects the near doubling of Lloyds’ share price in the past three years.

UKFI is said to be more interested in Lloyds’ overall bonus pool, which last year was £395m. It is likely to be lower this time because there are fewer staff following TSB’s demerger and Lloyds’ £218m in fines over Libor rigging.

Lloyds is also finalising plans to pay its first dividend for six years. Even a token 0.5p or 1p a share would boost the Treasury’s hopes of selling its remaining 25 per cent stake.

Lloyds and RBS refused to comment.

Franc admission: Credit Suisse pay cuts

Directors and top executives at Credit Suisse have taken 25 per cent and 20 per cent pay cuts respectively to reflect the Swiss bank’s $2.8bn (£1.8bn) deal last year to settle with US regulators over helping tax evaders and the recent surge in the Swiss franc.

The bank said it had cut bonuses by 9 per cent to reflect “continued compensation discipline” and the fact that full-year pre-tax headline income for 2014 fell 5 per cent to Sfr6.79bn (£4.76bn).

Its chief executive, Brady Dougan, said that the bank expected the change in the franc since January would reduce profits by “approximately 3 per cent” and it would take until 2017 for cost cuts to make that up.

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