Lloyds boss Antonio Horta‑Osorio is set for a £2.3m bonus after an 83 per cent leap in underlying third-quarter profits to £1.5 billion – up from £831 million – as the bank revealed it was talking to regulators about restoring dividend payments.
But Lloyds also disclosed today that it has had to earmark a further £750m to compensate customers mis-sold payment protection insurance (PPI), taking its bill for the scandal to £8bn.
A bonus scheme announced earlier this year will see Horta-Osorio qualify for three million shares should the stock price remain above 73.6p for 30 trading days. This represents the average price paid by the government when the bank was rescued with a £20bn taxpayer bailout in 2008.
The shares have been trading above this level since 9 October and if they remain so at the close on 20 Novembe, the chief executive will qualify for the bonus. Today, the shares closed down 1.61p at 78.01p.
However, Horta-Osorio will not be able to sell the shares until 2018 under the long-term bonus plan.
Gail Cartmail, assistant general secretary of the Unite union said: “Yet again the banking world appears to be rewarding those at the top, and ignoring the contribution of staff.”
Horta-Osorio said he believed it was “very likely” there would be a further “significant” sell-off of the government’s stake in the bank in 2014. There was a £3.2bn sell-off last month that reduced the taxpayer stake from 39 to 33 per cent.
It came as Horta-Osorio said today Lloyds would be “a high-dividend paying stock” given its strong cash generation. Lloyds’ finance director George Culmer declined to say on a teleconference call today whether the bank would pay a dividend next February in the light of the talks with the regulator.
But Culmer said that in the banking industry “people are currently paying dividends whose capital ratios are significantly weaker than ours”.
The new PPI provision meant the bank struck a statutory pre-tax losses of £440m, compared with a £151m loss in the same period last year. Lloyds’ core tier one capital ratio is 9.9 per cent, partly due to an additional £13bn sale of non-core assets in the period to end-September, including the German insurance business.
Non-core assets are now £70bn, compared with £200bn at end-2010. Bad debts also continued to fall.
City analysts said Lloyds’ better Q3 performance was partly due to an improvement in the net interest margin – the difference between the interest banks charge for loans and the interest they pay on deposits.
On economic prospects, the Lloyds boss said: “The breadth of the economic recovery is increasing, getting broader and deeper.”
He added that Lloyds and its Halifax subsidiary had seen a “significant increase” in mortgage enquiries and applications since the launch of the government’s Help to Buy scheme.
“These are primarily first-time buyers – young people who can meet the monthly repayments on their mortgages, but could not necessarily raise the 20 per cent deposit needed to get on the housing ladder,” Horta-Osorio said.
Richard Hunter at broker Hargreaves Lansdown said: “There is clear progress being made. The shares are a significant distance from their historic highs, but from this lower base have added 97 per cent over the past year.”