Lloyds boss Eric Daniels falls into line and gives up £2.3m bonus

Published on Monday 22 February 2010 21:44

THE boss of part-nationalised Lloyds Banking Group has given up a £2.3 million bonus.

Chief executive Eric Daniels had been entitled to a maximum 225 per cent of his 1.04m salary due to his "significant individual contribution", but he has waived a bonus for the second year in a row to stave off another row over bank pay. Lloyds chairman Sir Win Bischoff said the board "greatly appreciates the leadership shown by his action".

Mr Daniels' move comes after Stephen Hester, his counterpart at part-nationalised, loss-making Royal Bank of Scotland, chose to forgo his payout, and follows similar decisions by the top bosses at Barclays, despite bumper profits.

Sir Win said: "Mr Daniels has taken this action because he believes that the excellent progress the group is making, based on the considerable contribution of many colleagues across the company, is in danger of being obscured by the current debate on executive bonus awards in the banking sector."

Lloyds saved HBOS from nationalisation at the height of the financial crisis in 2008 but was forced to take public cash to strengthen its balance sheet and is now 41 per cent owned by the taxpayer.

The bank said it was "mindful" of the public debate over bonuses although it highlighted its status as a retail and commercial bank – which means payouts will be far below the telephone-number figures handed out by investment banks.

A row over Mr Daniels' pay – and any indication that he profited personally from the HBOS deal – could also have prompted shareholder calls for him to step down.

Any other bonus payments across the group will be in shares, deferred and subject to clawback.

Lloyds' total bonus pool is expected to total about 200m, less than 1,700 per employee.

UK Financial Investments, which manages the government stakes in the bailed-out banks, welcomed Mr Daniels' decision.

HSBC's remuneration committee is due to meet this week before that banks results are published on 1 March. It has been considering raising the future base pay of chief executive Michael Geoghegan by about a third from 1.1m.

Mr Daniels' move comes as Lloyds and RBS are expected to disclose combined losses of almost 10 billion later this week.

Lloyds expects a stronger trading performance this year and in 2011, but retail bad debts reached 3.3bn for the first nine months of 2009. Its wholesale banking arm reported a vast 12.9bn in loan losses, largely thanks to HBOS. Lloyds is set to post losses of around 3.8bn this week.

RBS reported a record 24.1bn loss for 2008 and Thursday's figures are likely to reveal a further slide into the red in excess of 5bn last year amid bad debts and write-offs of about 13bn.

Meanwhile, Lee Hopley, chief economist at the EEF manufacturers' organisation, has warned that banks will face new challenges as demand for finance picks up during the economic recover.