LLOYDS Banking Group, owner of Bank of Scotland, has blamed the body that manages the UK Government's bank investments for a decision to link a £1.5 million bonus for chief executive Antonio Horta-Osorio to a "contrived" 61p a share valuation for the taxpayer's 40% stake.
Lloyds revealed it made a £570m pre-tax loss in 2012, an improvement on the £3.5 billion deficit of the previous year.
Its 97,000 employees will share a £365m bonus pool, down 3% on 2011, giving each £3900 on average. Cash bonuses are capped at £2000.
Mr Horta-Osorio will receive £1.485m in shares as a bonus for last year during which Lloyds's underlying profit rose from £638m to £2.6bn.
But these earnings were wiped out by provisions for mis-selling of payment protection insurance, with a £1.5bn charge in the fourth quarter of 2012 taking Lloyds's compensation pot to £6.8bn.
Mr Horta-Osorio said: "The substantial progress we made in 2012 means that we are now ahead of our plan to transform the group."
But Dominic Hook, national officer at trade union Unite said: "Lloyds is still making a loss and it's tainted by scandal, there is no justification for Antonio Horta-Osorio's share pot."
Lloyds said Mr Horta-Osorio's award will be deferred for five years and will vest only if its shares reach 73.6p for a sustained period or the UK Government sells 33% of its stake at a price of upwards of 61p a share.
Lloyds said Mr Horta-Osorio had suggested the 73.6p mark only for UK Financial Investments (UKFI), manager of the Government's stake in the part-nationalised banks, to propose the lower price at which the shares are booked in the national accounts.
Ian Gordon, analyst at Investec, said: "This is a new 'contrived' break-even number for UK Government accounting."
Lloyds chairman Sir Win Bischoff said it is "not necessarily easier" to reach the lower target because Mr Horta-Osorio doesn't control the share sale.
A spokeswoman for UKFI said it doesn't comment on its shareholdings.
Mr Horta-Osorio's payout comes after the chief executives of Royal Bank of Scotland and Barclays declined annual bonuses for 2012 after problems at their institutions.
Closing at 53.25p, down 1.22p or 2.2% on the day Lloyds's share price is 38.2% adrift of the 73.6p mark and 14.6%% below the 61p price on the national accounts.
This puts it closer to break-even on the Government stake than Royal Bank of Scotland whose share price of 314p needs to rise 59% to meet the Government's average £5 purchase price and is 29.6% behind the 407p a share at which it is valued on the Government books.
Lloyds will decide by the end of June whether to continue with the sale of 185 Lloyds TSB Scotland branches to Co-operative Bank or pursue a stock market listing.
They are part of the 632-branch Verde portfolio, being rebranded as TSB in August, that Lloyds has been ordered to sell by European competition officials as a condition of its 2008 bail-out.
Chairman Sir Win said Lloyds will seek to claw back more bonuses from previous executives on the back of the PPI compensation rise, "commensurate" with the £2m recouped last year.
Former chief executive Eric Daniels, who last year lost £580,000 of his 2010 bonus, has said Lloyds was "on the side of the angels" on PPI selling.
Mr Horta-Osorio retorted yesterday: "I can only imagine what would have happened if we were not on the side of the angels."
Lloyds will announce its plans for renewed dividend payments at the end of the first quarter. Lloyds said it had booked a 4% rise in lending to small and medium sized enterprises and hoped to repeat this next year.
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