Lloyds In Talks Over Rise In Staff Bonus Pot
Lloyds Banking Group is negotiating an increase to last year's staff bonus pool that will see the taxpayer-backed lender awarding close to £400m in incentive payments.
Lloyds is in advanced talks with UK Financial Investments (UKFI), which manages the Government's stake in the bank, about finalising the payments ahead of its annual results next Thursday.
Sky News has learnt that Lloyds is proposing to pay approximately £400m in bonuses for a year in which it will report a first statutory profit since 2010.
However, UKFI is understood to be pressing the bank to pay out as little as possible, with the likely outcome being "a modest increase" to last year's £360m in bonuses.
Lloyds staff, like their counterparts at Royal Bank of Scotland (RBS), are also expected to have the cash elements of their bonuses restricted to £2000 as the Treasury seeks to avoid being drawn into another political row over bankers' pay.
Lloyds has historically been the lowest payer of bonuses among the major UK lenders because it does not own an investment banking operation on the scale of Barclays, HSBC or RBS.
However, the gap between the bonus pools at Lloyds and RBS in 2013 will be the smallest since the two banks were rescued by British taxpayers in 2008.
Despite Lloyds' improved performance during 2013 a rise in bonuses may prove contentious after it this week added a further £1.8bn to its bill for payment protection insurance compensation. Its liability from the scandal now stands at close to £10bn.
RBS is expected to award bonuses totalling roughly £500m, meaning that the two Government-backed banks will pay out close to £1bn for a year when their aggregated financial results will show a loss of approximately £7.5bn.
It has also emerged in recent days that Lloyds is poised to pay its chief executive, Antonio Horta-Osorio, a bonus of just over £1.5m for 2013, if it secures approval from UKFI.
The award will be in shares and deferred for five years. A separate equity plan granted to him in 2011 and which could be worth up to £5.8m at the bank's current share price will pay out next month, although it is unlikely to do so in full.
Last Monday, the bank said it anticipated reporting an underlying profit for 2013 of £6.2bn and a small statutory pre-tax profit once mis-selling provisions had been accounted for.
"Subject to a return to sustainable profitability and there being no major unexpected changes in the Group's business outlook or regulatory requirements, the Board expects that it will apply to the PRA [Prudential Regulation Authority] in the second half of 2014 to restart dividend payments," Lloyds said.
The bonus controversy will be thrust back into the spotlight early next week when Barclays gets the UK bank earnings season underway.
As Sky News revealed this week, Barclays will disclose that it awarded about £2.4bn in incentive awards for 2013, an increase on the prior year that will undermine chief executive Antony Jenkins' pledge to move the bank on from an era of lavish pay.
The debate about industry pay will be framed by the publication on Monday of a consultation paper about professional standards in banking by Sir Richard Lambert, the former CBI director-general.
Sources said on Saturday that Sir Richard had made it clear that he did not wish to occupy a formal role with a new training or standards body once it was operational.
His recommendations are expected to cost the industry tens of millions of pounds to implement.
Lloyds declined to comment while Sir Richard could not be reached.