Lloyds Banking Group has been accused of “stuffing the pockets of already overpaid bankers” after proposing increases for top bosses that could result in a £9.1m payout for its chief executive, Charlie Nunn.
The bank revealed on Wednesday that staff would share a £446m bonus pot – the highest in four years – for their work in 2022, despite reporting flat annual profits, after an increase in the money put aside for a potential jump in defaults.
As part of a new pay policy, to be put forward to shareholders at its AGM on 18 May, Lloyds has proposed increasing potential payouts for bosses – including Nunn and its chief financial officer, William Chalmers.
At £9.1m, Nunn’s potential pay packet tops the £8.3m that his predecessor, António Horta-Osório, could have achieved under the last pay policy approved by shareholders in 2020. Chalmers’ maximum pay will rise from £4.7m to £6.3m, thanks in part to a rise in his potential bonus, which could now be worth 140% of his salary, up from 100%.
Both estimates are based on Lloyds’ share price rising 50%. Without that increase, the maximum payout would be £7.4m for Nunn and £5.1m for Chalmers.
Luke Hildyard, director of the High Pay Centre thinktank, said the increases in remuneration were a “fitting reflection” of the economic inequalities plaguing the UK. “The UK will not be able to solve problems of stagnating pay and living standards for those in the middle and at the bottom while major employers continue to lavish so much of their wealth on a tiny number of people at the top,” he said.
Fran Boait, co-director of campaign group Positive Money, said: “It is exactly this kind of behaviour that strengthens the call for a windfall tax on the profits banks are making from the public. As Lloyds are showing, without government intervention these windfalls will otherwise be wasted stuffing the pockets of already overpaid bankers who need the money the least.”
Horta-Osorio – who stepped down in 2021 – still holds the record for the highest annual payout for a Lloyds executive, at £11.5m in 2014.
That is three times the £3.8m pay that Nunn was granted for 2022. That package was down 31% from the £5.5m he received in 2021, which included a £4.2m buyout to compensate him for shares he gave up when he left HSBC to become the Lloyds chief executive in August that same year.
The banking group reported flat profits of £6.9bn for the year, in line with average estimates from analysts, despite recording a near-50% jump in net interest income to £14bn, which accounts for the difference between what the bank pays out to savers and charges its loan and mortgage customers.
A series of interest rate hikes by the Bank of England, compounded by Liz Truss’s disastrous mini-budget in September, have led UK lenders to drastically increase borrowing costs on mortgages and loans.
Those charges led to a substantial increase in net interest income for Lloyds in the final three months of the year, helping fourth-quarter profits surge 80% to £1.8bn.
Nunn and other high street bank bosses have denied shortchanging savers by failing to increase interest rates on savings accounts at the same pace.
The increase in annual net interest income was offset, in part, by a significant drop in other income, which includes its equity investments business. However, Lloyds was also forced to put aside £1.5bn to protect itself against a potential increase in defaults by its borrowers, who could struggle to repay their loans and mortgages in an economic downturn.
That contrasts with a release of £1.4bn a year earlier, when the lifting of Covid restrictions had increased optimism over the UK’s economic prospects.
It comes amid weaker forecasts for the UK economy. “We are seeing a slightly more negative outlook than we saw at the end of Q3,” Nunn told reporters on Wednesday. He said the bank was expecting a 1-1.2% decline in UK GDP this year, a 7% drop in house prices, and a slight increase in unemployment that could reach 5.3% in 2024.
Lloyds also announced it was planning to increase shareholder payouts, by paying out a final dividend of 1.6p a share, and launching a share buyback programme worth up to £2bn.
