Lloyds Banking Group has revealed a 12% increase in its bonus pool for 2022 despite pre-tax profits remaining flat on the previous year.
The bank – Britain’s biggest mortgage lender – revealed earnings of £6.9bn for the 12 months, matching the sum achieved in 2021, even though revenue had risen 14% to £18bn.
The results statement showed that a leap in profitability from higher interest rates was largely offset by a £1.5bn provision for bad loans that was booked by the bank over the course of the year – £500m of it in the final quarter.
The charge reflects mounting concern that more customers are at risk of defaulting on their obligations because of higher interest rates amid the cost of living crisis.
The 12% rise in the bonus pool to £446m, revealed separately in the bank’s annual report, is above the peak rate of inflation seen over the year as soaring energy costs associated with Russia‘s war in Ukraine intensified the squeeze on household budgets.
Chief executive, Charlie Nunn, would take £1.33m of that sum, the document said, plus a long-term share plan award of 150% of salary.
It took his total awards to £3.8m.
The bank, which incorporates Lloyds Bank, Halifax, Bank of Scotland and Scottish Widows, also announced it would pay a 1.6p per share final dividend and a share buyback of up to £2bn.
It amounts to £3.6bn of shareholder returns.
The group said rising interest rates and additions to its loan book helped profits almost double over the final three months of 2022.
The latter rose by £6.3bn to £475bn over the year.
Mr Nunn told investors: “While the operating environment has changed significantly over the last year, the group has delivered a robust financial performance with strong income growth, continued franchise strength and strong capital generation, enabling increased capital returns for shareholders.
“We know that the current environment continues to be challenging for many people and have mobilised the organisation to further support our customers.
“Our purpose-driven strategy is more relevant now than ever before. We remain committed to helping Britain prosper and helping the country recover from the current economic uncertainties.”
Shares fell back by 2% at the market open.
John Moore, senior investment manager at RBC Brewin Dolphin, said: “Lloyds has finished off the major UK banks’ results season with a performance that is 80% NatWest and 20% Barclays.
“Profits have been flat year-on-year, with bad loan provisions adding extra costs, among other moving parts.
“The bank has a history of prioritising its dividend, which is up 20% on last year, and acts as a good indicator of sentiment from management.
“Alongside the dividend increase is a £2bn share buyback programme, underpinned by enhanced guidance for the years ahead – all of which suggests a relatively positive outlook for Lloyds.”