UK

Bonuses For Lloyds Staff Despite Bank Loss, But City Reacts Well To Improvement On 2011 Figures

01/03/2013 08:45 GMT | Updated 01/03/2013 08:53 GMT

Banking bonuses at Lloyds Banking Group were cut by 3% across the bank, following its announcement that it had made a £570 million annual pre-tax loss.

Staff will share out a £365m bonus pool, down 3% on 2011, giving each employee around £3,900 on average - although all cash bonuses will be capped at £2,000.

Lloyds boss Antonio Horta-Osorio will see his £1.5 million bonus deferred until 2018, and in a similar deal to RBS, will only receive that bonus if shares reach and remain at 73.6p for a sustained period, or if the government is able to sell at least a third of its stake at a profit from the 61p a share it bought them at.

Shares closed at 54.5p on Thursday night and had fallen to 53.1p when HuffPost UK went to press, amid reports the government was keen to offload its 39% stake in Lloyds when shares soon.

The £570m loss was attributed to £1.9 billion Lloyds had to set aside to settle its mis-selling scandals. £1.5bn of it was set aside to pay customers who were mis-sold payment protection insurance, with a further £310m charge arising from the mis-selling of interest rate-hedging products to small and medium-sized businesses.

Despite the overall loss, financial experts spoke of a turning point for Lloyds, given the loss from 2011 was £3.5bn.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said while the bank remained "a work in progress", it appeared to be further down the line than the likes of RBS.

"Many of the key metrics are showing promising progress, and exceed expectations, such as the capital position, ongoing cost reductions, an improving impairments position and strong growth in underlying profit.

"The performance of the shares has been strong of late, although in the context of a five-year view there is a long way to go before recapturing former glories. The 56% rise in the price over the last year compares to a 7% hike for the wider FTSE100, but in the context of previous levels, there remains room for manoeuvre."

Horta-Osorio also took the opportunity to insist the group's sale of more than 600 branches to the Co-operative Bank remained on track, in spite of reports earlier this week that the Co-op is battling to plug a potential £1bn capital hole discovered by the Financial Services Authority.

He said the Co-op remained "absolutely committed to this deal" and confirmed Lloyds will be separating the branches under the TSB brand on the high street by August in preparation to be offloaded.

When Lloyds was forced to take state aid in the aftermath of the financial crash, the European Commission ruled it had to sell part of our business to a new owner to increase competition and customer choice in the UK banking sector.

The Co-operative agreed last summer to buy 632 Lloyds bank branches, but even if the Co-op deal goes through, Lloyds has been forced to set up an entirely new bank - which will be branded TSB - for customers to be moved into in the meantime.