The sale of taxpayer-owned shares in Lloyds Banking Group looked to be a step closer today despite the lender's £6.8 billion PPI mis-selling scandal sending it to another big loss.

Lloyds said it remained in the red with £570 million of losses in 2012 after taking more mammoth mis-selling provisions.

In a move further fuelling anger over bank bonuses, the group revealed a £1.5 million shares award for boss Antonio Horta-Osorio and said staff will share out a £365 million total pot.

But one of the conditions for Mr Horta-Osorio's payout is that the Government must have sold at least a third of its stake above 61p - the average price at which shares were bought during the bank's bailout in 2008.

The target price is far lower than previously thought and raises the prospect of an imminent return to the private sector, with shares currently above 50p despite a 6% fall today.

Fellow state-backed player Royal Bank of Scotland yesterday also fuelled taxpayer hopes as it claimed the group would be fit for the Treasury to start selling down its 81% holding by the end of 2014, although the Government stressed it had no timetable for a stake sale.

A Treasury spokesman said today: "The Government's strategy remains to see Lloyds continue the progress it has made in reforming itself into a strong and sustainable bank that supports the British economy, which in time can be returned to full private ownership.

"Today's results show that it is making strong progress in improving its core underlying performance and strengthening its balance sheet, but that there is still work to be done as it continues to deal with the legacy of the past."

Lloyds was the top-performing FTSE 100 stock last year after shares surged 80% in 2012 and Mr Horta-Osorio said he was "very confident" taxpayers will recoup their cash.

On an underlying basis, the results showed group profits surging from £638 million to £2.6 billion in 2012, but bottom-line losses came as it set aside another £1.5 billion for compensation relating to payment protection insurance (PPI) and another £310 million for interest rate swap mis-selling claims in the fourth quarter alone.

Total mis-selling provisions have now reached £6.8 billion for PPI after Lloyds put by £3.6 billion in 2012, with £400 million overall for the swaps scandal.

Trade union Unite hit out at the bank's bonus plans, which come after RBS yesterday said it was paying staff £607 million in bonuses despite reporting losses of £5.2 billion for 2012.

United national officer Dominic Hook 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, which is 39% taxpayer-owned, said each employee will receive around £3,900 on average, although cash bonuses have been capped at £2,000.

Sir Win Bischoff, chairman of Lloyds, said: "We believe our employees should be rewarded for their contribution to the further strengthening of the business in 2012."

Mr Horta-Osorio, who requested that his bonus is linked to the taxpayer bailout price being achieved, added: "It's my absolute focus and commitment to get taxpayer money back."

His payout has been deferred for five years and will only be paid out if shares reach and remain at 73.6p for a sustained period, or if the Government is able to sell at least a third of its stake above 61p level.

Mr Horta-Osorio also insisted the group's sale of more than 600 branches to the Co-operative Bank remained on track despite reports earlier this week that the Co-op is battling to plug a potential £1 billion capital hole discovered by the Financial Services Authority.

He said the Co-op remained "absolutely committed to this deal" and confirmed Lloyds will be separating the branches under the TSB brand on the high street by August in preparation to be offloaded.

But shares in the group fell and Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said the group remains a "work in progress".

Lloyds said losses narrowed significantly in 2012 from £3.5 billion a year earlier thanks to improvements in its core business.

Much of this was down to cost-cutting as income fell 13% amid historic low interest rates.

Lloyds said it was very close to its original target to bring costs down to about £10 billion and was now hoping to cut costs even further, to £9.8 billion, in 2013.

The group added that it boosted lending to small business by 4% on a net basis and made £26.2 billion of gross new mortgage lending in 2012.