It is an open secret that Lloyds Banking Group has emerged as the most notorious in the lot in the entire PPI mis-selling scandal. It has robbed off billions from the pockets of the ignorant and innocent customers by tricking them in the worst possible manner. However, they couldn’t continue with their little game of manipulation and were made to pay a huge amount as compensation to the mis-sold buyers. The amount of the compensation turned out to be so high that it started affecting the bank’s profits and earnings on a regular basis. It cut down Lloyd’s annual pre-tax profits from £2.8 billion to £1.6 billion!
Antonio Horta-Osorio (Chief Executive, Lloyds Banking Group) thought of bringing some relief into the picture and easing down the troubles for their shareholders by giving them a one-off special dividend. Shareholders or investors are always special for any financial institution. They provide the firm with the funds required to run the operations and assist whenever they face difficulties. When the firm is facing a crisis such as the PPI issue, the shareholders are bound to doubt the institution they have put their money into. This was realised by Lloyds as soon as they started sinking deeper into the compensation payment mire. The Portuguese banker also maintained the fact that Britain is in a much stronger and longer recovery cycle than what people believe. He managed to give confidence to the mis-sold buyers as well as the nation as a whole that the UK will be back on a sound economic track in no time!
Chief Executive’s Pay Package Raising Alarms
However, the pay-package of the Chief Executive caused a lot of controversy post his decision of helping the shareholders. Though the salary fell down from £10.8 million to £8.5 million, his base salary is still reported to increase by 6 per cent, compared with a mere 2 per cent rise for the employees. Also, his bonus packages are supposedly linked with his base salary, which would result in an increase in his maximum payment in any case whatsoever. In one of his interviews, Antonio said that he is witnessing an immense growth across the sectors and regions where the bank functions. He went on to add that he is positive about the outlook of the UK economy, and given that they handle around 18 per cent of small and medium enterprises’ accounts and 25 per cent of the current accounts in the country they have a pretty good visibility. Antonio also claims that he achieved this with a much lower level of debt, which wasn’t really happening anywhere else in the world. The total debt, comprising of the personal, corporate as well as the public debt is reportedly coming down as a proportion of the GDP, which he also interprets as a recovery cycle being the longer one.
PPI Claims Continue To Pour In For Lloyds But Share Value Rising
The exponential increase in the complaints pouring in against the bank resulted in Lloyds setting aside a specific sum of money to take care of the compensation of the mis-sold buyers. Over the years, Lloyds has set aside billions of pounds for PPI compensation payments. Still, the PPI mis-selling scandal would remain a powerful detonator. Apparently, the charge worth of £2.1 billion was taken in the last quarter of the final year and pushed Lloyds into a loss during the concerned period. After all these issues, Lloyds made a statement saying that it expects the number of claims to start rising again as the Financial Conduct Authority has imposed a deadline until which the mis-sold buyers need to register their complaints with the concerned lender.
In the previous year, the bank had been doing extremely well, apart from the PPI issue standing in their way. Last year, PPI claims cut down the bank’s profit from £1.8 billion to £1.6 billion (in spite of the underlying profit rising by 5 per cent). In another one of his interviews, Mr. Antonio said that their income was once up one per cent to £17.6 billion, their costs were slightly down again and even their bad debt impairments were sharply down. The bad debt charge fell down to £568 million in another reflection of how the customers at Lloyds are riding the economic cycle. Finally, the bank has declared a dividend of 1.5p, taking the final total for the year to 2.25p. After getting a clearance from the Bank of England, it announced a 0.5p special dividend paid out of the extra capital above the regulator’s requirements.
After this, Lloyds’ shares jumped by almost 10 per cent or 6.05p, to 68.25p, which is their highest level since the Chancellor, George Osborne delayed the £2 billion discounted sale of shares to retail investors at the end of January. The official spokesperson of Robin Hood Tax Campaign, David Hillman, recently made a statement saying that Lloyds PPI rip-off is a never-ending story that not only hits the customers, but also the shareholders and the taxpayers. He also suggests that now is not the time for the Government to ease up the much-needed reform for the financial sector. In spite of the bank being heavily involved in one of the biggest scams, the city has still cheered the decision of increasing the shareholders’ dividend. This is probably due to the amount of money the bank has been spending over the years to make right what had gone wrong from the beginning. This is one of the few measures taken by the executives of this notorious financial institution in order to win back the trust of their internal as well external public. Investors and shareholders are the backbone of an organisation, and in times like these, there are chances of them losing trust in the institution. This is why Lloyds Banking Group took this wise decision after they were struck with the heavy blow of PPI and made sure that the people who invested into the firm get more dues even if the firm itself has to suffer by paying billions to the affected buyers.