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Lloyds bank boss takes 28% pay cut after annual profits fall

Kalyeena Makortoff Banking correspondent
Photograph: Stefan Wermuth/Reuters

António Horta-Osório, formerly Britain’s best-paid banking boss, has taken a 28% cut in his £6.5m pay package as Lloyds Banking Group reported a sharp fall in profits last year.

The group was hit by an additional £2.5bn bill for payment protection insurance, sending pre-tax profit for 2019 down by more than a quarter to £4.4bn. That compared with £6bn a year earlier, but was ahead of the £3bn expected by analysts.

Lloyds has slashed the total pay package for its chief executive to £4.7m, and has cut the group bonus pool for the first time in four years, with payouts down 33% to a total of £310m.

Horta-Osório, the chief executive, is now the second-highest paid UK bank boss, behind Barclays’ chief executive, Jes Staley. Staley was paid £5.9m for 2019 despite UK regulators launching an investigation over his links to the sex offender and disgraced financier Jeffrey Epstein in December.

Lloyds said the bonus cuts reflected results that were “heavily impacted by the additional PPI provision and other conduct-related issues”.

Of the additional £2.5bn in PPI charges last year, £1.8bn was taken in the third quarter. The bank made no further provisions in the final three months of the year, signalling that the mis-selling scandal may now be at an end.

The bank’s chief financial officer, William Chalmers, said he expected the final batch of PPI claims to be processed this year, but refused to rule out any further charges. “There are, as ever, uncertainties in this area and one would never say never until the last ... claim is processed, frankly. But we are gradually eliminating those uncertainties.”

Lloyds has paid out significantly more in compensation than any other bank, putting aside almost £22bn to cover PPI. The bill for the banking sector as a whole is more than £50bn.

Profits were also hit by a 38% jump in bad debts to £1.3bn across both its retail banking business and commercial division, following two large corporate failures. Lloyds executives would not confirm the name of the two collapsed businesses that hurt its bottom line. However, Lloyds is known to have been one of the main lenders to the airline and package holiday group Thomas Cook, which collapsed in September.

Horta-Osório said he was approaching 2020 with “prudent optimism”, following a challenging year featuring slowing global growth and political uncertainty. “Now with a new majority government in place and the UK having left the EU, there is a clearer sense of direction and some signs of gradually improving economic indicators,” he said.

Lloyds’ financial performance tends to reflect the health of the UK economy, as the domestically focused bank is one of the country’s largest mortgage providers and business lender.