High street banks are being urged to show restraint on pay as they prepare to declare the size of their bonus pots for 2014, at a time when the sector faces fresh scrutiny over its conduct.
HSBC – mired in controversy over its Swiss subsidiary – will be the first to report on Monday, followed by bailed-out banks Royal Bank of Scotland and Lloyds Banking Group at the end of the week. Barclays and Standard Chartered report the week after.
The size of the bonus pools are currently being finalised but there are expectations that Barclays intends to cut its total payouts to below £2bn – down from £2.4bn the previous year – and that the bailed-out banks will also cut their bonus pools.
Even so, the bonuses will be disclosed at a sensitive time, a matter of weeks before the general election on 7 May and as HSBC faces the fall-out from the leak of bank account details operated by its Swiss arm. It also comes after a year when the industry has faced big fines for rigging financial markets.
Frances O’Grady, the TUC general secretary, said: “Big bank bonuses will highlight once again that those at the top do better every year, while the majority of people are locked out of a recovery that has passed them by. Average wages are still stagnant, only made to look better by ultra-low inflation. If we are to build a fairer and more stable economy we don’t just need restraint on bonuses, but real cuts in pay for those at the top.”
Unusually, the banks appear to be preparing the release of remuneration details of their directors alongside their results. Such information is more often published a few weeks later in annual reports.
Much of the focus is already on Lloyds, which is expected to restore dividends to shareholders for the first time since the 2008 banking crisis. The 24%-taxpayer-owned bank’s remuneration committee is expected to meet next week to finalise the terms of a share payout to its boss António Horta-Osório, who stands to receive more than £7m from a three-year pay deal. Seven other members of his management team could also be in line to share £20m if all the performance criteria are met in full. The three-year bonuses for the Lloyds executive team have increased since they were awarded because of the rise in the share price from 34.7p each to 77p.
Fined £226m for rigging Libor in 2014, Lloyds is expected to cut its bonus pool by £20m to £375m as a result of the penalty. RBS is undertaking a review following its £400m fine for manipulating foreign exchange markets, which had led to expectations its bonus pool will be around £500m. The 79%-taxpayer-owned bank has already said it has frozen the bonuses of 18 traders as its review continues.
David Hillman of the Robin Hood Tax campaign said: “Bonuses may be down a bit on last year but the truth is that scandals and bailouts have not stopped bankers from continuing to coin it in. At a time when taxpayers are still feeling the squeeze it’s staggering that part-state-owned RBS and Lloyds will be paying out almost £900m in bonuses.”
The board of UK Financial Investments, which controls the taxpayer stakes in Lloyds and RBS, discussed bonuses this week but the size of the bonus pots are yet to be finalised.
Barclays is thought to be keen to avoid the controversy over last year’s bonuses, which were increased 10% even though profits fell 32%. Its boss Antony Jenkins said then that the increased payouts were needed to avoid a “death spiral” caused by top bankers walking out.