Lloyds Banking Group just announced in its 2015 results that profits dropped because of compensation it had to pay out to victims of a particular mis sold loan insurance.
And now they’re punishing the bankers for it — Bonuses were reduced to £353.7 million, from £369.5 million in 2014.
And if bankers earned a cash bonus — they only get £2,000. The rest of the bonus is topped up with shares, which is also subject to deferral or being cut again on performance.
While that size of bonus may seem OK for the average worker, to put into perspective how small this is for the industry statistics from Emolument.com show that i
n 2016, the average associate, a fairly junior position in banking, received a £90,000 basic salary, topped up with a very healthy £50,000 bonus.
Lloyds said in a separate statement to its results that the bank implemented a “26% collective performance adjustment” to the group’s bonus pool because of the amount of litigation and conduct issues that have hit the lender’s profits and shareholder returns over the last year.
This mainly includes £30 million being “deducted to recognise the impact of failing to deliver the highest levels of customer service in payment protection insurance (PPI) complaint handling.”
In 2015, Lloyds PPI provision stood at £4 billion of which an additional £2.1 billion was racked up in the fourth quarter.
“Our approach to reward is intended to provide a clear link between remuneration and delivery of the Group’s key strategic objectives, supporting the aim of becoming the best bank for customers, and through that, for shareholders,” said Lord Blackwell, the Group’s Chairman in a statement.
“We believe in offering fair reward. We are embedding a performance-driven and meritocratic culture where colleagues are rewarded for behaviours aligned to the long term sustainable success of the business, our commitment to rebuilding trust and changing the culture of the Group.
“We want to ensure colleagues are empowered, inspired and incentivised to do the right thing for customers. Colleagues are rewarded in a way that recognises the very highest of expectations in respect of conduct and customer treatment, and when behaviour falls below acceptable standards, it is important that accountability is taken collectively as well as individually. This is particularly the case when dealing with, and learning from, mistakes of the past.”
Lloyds results were mixed. Profits were down but it has cut costs and will still pay shareholders a dividend. Here are the highlights provided in the statement by Lloyds:
- Statutory profit before tax of £1.6 billion (2014: £1.8 billion), with increased PPI charge.
- Underlying profit of £8.1 billion, up 5% (up 10% excluding TSB); underlying return on equity of 15.0% (2014: 13.6%).
- Total income up 1% to £17.6 billion.
- Net interest income of £11.5 billion, up 5%, driven by further margin improvement to 2.63%.
- Operating costs lower at £8.3 billion despite additional investment and Simplification costs; market-leading cost:income ratio further improved by 0.5 percentage points to 49.3%.
- Impairment charge down 48% to £568 million; asset quality ratio improved by 9 basis points to 0.14%.