Lloyds announces £3.5bn loss as RBS boss defends bonuses
Stephen Hester argues that a bank that did not pay bonuses would fail
LLOYDS today announced losses of £3.5bn for 2011. Because the result includes a £3.2bn one-off hit due to compensation claims from the payment protection insurance (PPI) scandal, the part-nationalised bank felt able to say it is in a "significantly stronger" position than 12 months ago.
However, the bank's performance is significantly worse than in 2010, when it made pre-tax profits of £281m. Despite this, Lloyds is setting aside £375m in bonuses for its staff in 2011, down just 30 per cent on the 2010 pay pot.
Lloyds's losses are nearly twice those at fellow bailed-out bank Royal Bank of Scotland.
The CEO of that bank, Stephen Hester (above), went on Channel 4 News last night to defend the performance of RBS and the awarding of bonuses to its staff. They are set to share a bonus pot of £1bn - despite losses for 2011 of nearly £2bn.
"We have to clean up the biggest time-bomb of debt ever built on a bank balance sheet," said Hester, who is mid-way through a five-year plan to relieve RBS of its toxic assets and loss-making ventures.
"That is a difficult job and in the last three years we have got rid of £700bn of bad assets - twice the entire size of the Greek national debt. That is part of the job that people are being paid to do."
Hester said that RBS's normal banking operations earned £6.1bn of profit in 2011 - "roughly the size of Barclays' entire profit".
Last month Hester was forced to give up his bonus for 2011 following a public outcry. Asked if it was possible to run a bank without awarding bonuses to staff, he said such a venture would fail.
"If my employment proposition had been 'Come from your perfectly good existing job to RBS, get more grief, do a difficult job and get paid less', shall I tell you how many people would have accepted? The answer is none or very close to none.
"But that is not a defence of payment for failure."