Lloyds hikes bonus pool by 12% despite flat profits of £6.9bn due to bad loan charge
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.
Charlie Nunn
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.
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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.”
Business
Vivergo: How US-UK trade deal could bring about collapse of huge renewable energy plant in Hull
The smell of yeast still hangs in the air at the Vivergo plant in Hull but the machines have fallen quiet.
More than 100 lorries usually pass through here each day, carrying 3,000 tonnes of wheat. It is milled, fermented and distilled. The final product is bioethanol, a renewable fuel that is then blended into E10 petrol.
This is a vast operation. It took several years to build, with considerable investment, but it is on the verge of closing down. Management and staff are holding out for a last-minute reprieve from the government but time is running out.
It’s been a turbulent journey. The plant was already being annihilated by US rivals, losing about £3m a month. Vivergo and Ensus, based in Teesside, blamed regulations that enable US companies to earn double subsidies.
They were pushing for regulatory change but then a killer blow: The US-UK trade deal, which allows 1.4 billion litres of American ethanol into the UK tariff-free (down from 19%).
“We’ve effectively given the whole of the UK market to the US producers,” said Ben Hackett, managing director at Vivergo.
“If we were to have the same support that the US industry has, if we could use genetically modified crops, we wouldn’t need that tariff. We would be able to compete. If we had the same energy costs. We wouldn’t need those tariffs.”
The government has the weekend to come up with a plan that could keep the business running. If it fails, Vivergo will begin issuing redundancy notices to its 160 staff.
Ben Hackett
It’s a devastating prospect for workers, many of them live in Hull and are nervous about alternative opportunities in the area.
Mike Walsh, a logistics manager who has been working at the plant for 14 years, said: “It’s not a great place to be at the moment. It’s a very well paid, very high-skilled role and they’ve (Vivergo) given everybody an opportunity in an area that doesn’t pay that well…. The jobs market isn’t as good as what people would like. So it does impact the local economy.”
He called on the government to “help us, save us, give this industry a future”.
His colleague Claire Wood, lead productions engineer, said: “I moved here after a career in oil and gas for 10 years, partly because I want to be part of the transition to renewable fuels. I can see so much potential here and it’s absolutely devastating to know that this place might be closed very, very shortly and that all that potential just goes away.”
Thousands more could be affected. Haulage companies may have to lay off truck drivers and farmers could also suffer a blow.
Vivergo makes bioethanol using wheat. That wheat is bought from farms from Yorkshire and Lincolnshire.
Claire Wood
The National Farmers Union has sounded the alarm, saying: “Biofuels are extremely important for the crops sector, and their domestic demand of up to two million tonnes can be very important to balance supply and demand and to produce up to one million tonnes of animal feed as a by-product.”
Another bioproduct is carbon dioxide. The gas can be captured and used to put the fizz in drinks or injected into packaging to preserve food.
If Vivergo and Ensus were to go, Britain would lose as much as 80% of its output of carbon dioxide. Supplies are already tight across Europe, meaning this decision could compound shortages across a range of sectors, from meat-packing to healthcare.
The industry is calling on the government to help. Vivergo says it needs temporary financial support but that the government must create a regulatory and commercial environment in which it can thrive.
It says rules that award double subsidies to companies that use waste product in their bioethanol must be changed. At present, these rules are being used by US companies that make ethanol from Uldr – a by-product of processing corn. They argue this is not a genuine waste product.
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Another option is to grow the market. Industry leaders are calling on ministers to increase the mandated renewable fuel content in petrol from 10% to 15% and for an expansion into aviation fuels. That would allow British companies to carve out a space.
The government has been locked in talks with the company since June.
It said: “We will continue to take proactive steps to address the long-standing challenges it faces and remain committed to a way forward that protects supply chains, jobs and livelihoods.”
However, the time for talking is almost over.
Mr Hackett said he had no idea how the government would respond but he was firm with his stance, saying: “In times of global uncertainty, losing that energy certainty and supply from the UK is a problem.
“I think what they’re missing out on is the future growth agenda. We’re the foundation on which the green industrial strategy can be built. We make bioethanol that today decarbonises transport. Tomorrow it will decarbonise marine. It will decarbonise aviation.”
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