Lloyds boss awarded £8.5m pay package despite PPI profits hit

Lloyds Banking Group has revealed an £8.5 million pay package for its boss and handed out a special dividend payment to shareholders despite seeing profits fall after more mis-selling charges.

The high street lender awarded chief executive Antonio Horta-Osorio a deferred annual bonus of 723,977 shares and hiked his salary by 6% to £1.13 million.

His pay details were revealed alongside annual results showing bottom-line pre-tax profits fell 7% to £1.64 billion in 2015 from £1.76 in 2014 after taking another £2.1 billion hit for payment protection insurance (PPI) mis-selling.

Lloyds said the extra charge for PPI in the fourth quarter took its total for the scandal last year to £4 billion.

But it said stripping out PPI and other one-off costs, underlying profits rose 5% to £8.1 billion.

Shares in Lloyds surged as much as 10% after it announced a 2.25p dividend per share and a 0.5p special dividend in a total payout worth £2 billion.

It marks the latest sign of its recovery, after the group resumed shareholder dividends last year for the first time since it was rescued by the taxpayer in 2008.

Lloyds also confirmed it was sharing out a £353.7 million bonus pot among staff, working out at £4,600 per employee on average, although cash bonuses are capped at £2,000.

Mr Horta-Osorio will only receive his annual shares bonus if the Government sells off its remaining 9% stake in the bank or the shares remain above the taxpayer break-even price for 126 consecutive trading days.

His pay rise marks his first since joining the group in January 2011.

But 4% of the salary rise will only be paid in shares, which will also only be awarded when the Government sells its stake.

Details on pay and bonuses showed Mr Horta-Osorio's overall pay package fell from £10.8 million in 2014, due in part to a £234,000 reduction in the wake of the bank's £117 million fine last year for mishandling PPI compensation claims.

A number of other senior bosses at the bank also had their bonuses cut back for 2012 and 2013, while the group said 66 staff received 1 million euro (£800,000) or more in 2015.

Lloyds added its annual staff bonus pot was down from £369.5 million in 2014.

Lord Blackwell, the group's chairman, said: "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."

Mr Horta-Osorio shrugged off recent sharp falls in the group's share price amid a wider banking sell-off on global growth concerns.

He said the bank was well placed "in the face of current market uncertainty".

Lloyds shares have fallen more than a fifth over the past year and remain below the 73.6p average price paid by the Government in its £20 billion bailout.

Mr Horta-Osorio declined to comment on the bank's position on Britain's EU membership vote, saying it was a "matter for the British people".

The group will discuss the June 23 referendum at its upcoming board meeting, he said.