Video: Lloyds warns on 2012 as it reports £3.5bn loss
BRITISH Lloyds Banking Group has reported a loss of £3.5bn (€4.1bn) for 2011, hit by a £3.2bn charge for mis-selling payment protection insurance (PPI), and warned income will be lower in 2012.
Lloyds, which is 41pc owned by the taxpayer, reported a loss before tax of £3.5bn, down from a £281m profit in 2010.
Chief executive Antonio Horta-Osorio, who returned to Lloyds' in January after a stress-related sleeping disorder kept him on the sidelines for two months, said:
"Given the economic outlook, in 2012, on a combined businesses basis, we expect income to be lower than in 2011, given further non-core asset reductions, subdued demand in the core loan book, higher wholesale funding costs, and interest rates likely to remain at low levels for longer."
Lloyds also said its total bonus pool for last year was £375m, down 30pc against 2010, with an average bonus of £3,900 for each of its 100,000 staff.
The lender does not have the kind of investment banking arm and related bonuses that have caused controversy at RBS, and Mr Horta-Osorio had already turned down a bonus for 2011 because of his absence.
Stripping out the PPI charge and other one-off costs, Lloyds said it made a £2.7bn profit in 2011, up 21pc on the same measure in the previous year.
The bank said it is "in a significantly stronger position than it was 12 months ago" as it improved its capital position and increased deposits by 6pc to £406bn.
However Lloyds said its income slipped 10pc to £21.1bn because of "subdued demand" for loans and customers continuing to pay down debt, as well as lower margins and the sale of non-core businesses.
The bank, unlike rival Royal Bank of Scotland, which also reported a loss yesterday, exceeded the targets for lending to businesses set by the Project Merlin agreement with the Government.
"In the full year we provided £45bn of committed gross lending to UK businesses, of which £12.5bn was to SMEs," Lloyds said.
Mr Horta-Osorio also sounded a pessimistic note about the outlook for the UK economy,
In the results statement he warned of “further weakness in the first half of 2012 followed by a relatively modest recovery in the second half” resulting in flat GDP for the whole year.
But the bank boss also said there would be a heavier toll on jobs - Lloyds expects unemployment to rise to 9pc by 2013.
On Monday, Lloyds confirmed that 13 directors, including former chief executive Eric Daniels, would be stripped of about £2m of their 2010 bonuses as a penalty for the PPI scandal.
Mr Daniels was forced to forfeit 40pc of his £1.45m award, equivalent to £580,000, while four other executive directors will lose a quarter of their bonuses.
The move was the first time a British bank has exercised a “clawback” option on executive pay packages since the financial crisis.
Mr Horta-Osorio has also come under pressure to hand back part of his signing-on award to reflect the lender's decision to claw back bonuses. He joined Lloyds from Santander in January last year, and was awarded £4.6m in shares as part of a signing-on fee to buy him out of his incentive plans.
In January Mr Horta-Osorio said he would not take an annual bonus for 2011 because his absence and "the tough financial circumstances" faced by many Britons would make such a payment inappropriate. He had been in line for a bonus of up to £2.39m, on top of his £1.06m salary.