The chief executives of Britain’s biggest high street banks will be handed more than £3m in annual bonuses for 2014 but will see their payouts curbed after another year in which their employers faced heavy regulatory fines.
Sky News can exclusively reveal that the boardroom pay committees at Barclays, HSBC and Lloyds Banking Group are finalising the bonus awards, which will be announced alongside the lenders’ annual results during the next ten days.
News of the payouts, which will include a £1.3m bonus for Stuart Gulliver, the chief executive of HSBC, will come just weeks before the General Election campaign gets underway.
Insiders said that Mr Gulliver’s bonus had been cut from last year’s £1.83m, with a substantial proportion of the reduction attributable to the £216m fine for control failings in HSBC’s foreign exchange operations.
Mr Gulliver was paid a basic salary of £1.25m and a ‘role-based allowance’ worth £1.7m introduced to mitigate the impact of new European pay rules in 2014.
In total, he was awarded a remuneration package in 2014 of about £7.4m including pension contributions and other benefits, HSBC’s annual report will disclose on Monday.
Mr Gulliver made a public apology last weekend over the re-emergence of a tax evasion scandal at HSBC’s Swiss private banking arm and is focused on cleaning up the affair, which dates back a decade, according to one insider.
His annual bonus is expected to be the largest paid to a UK bank chief executive for 2014.
Sky News understands that the Barclays boss Antony Jenkins will receive an annual bonus of approximately £1m, roughly 50% of his maximum entitlement.
A bank insider pointed out that during 2014, Barclays improved its capital and leverage positions – both measures of its financial soundness – while removing £1.7bn from the bank’s cost-base, sending sent its shares up by around a third over the last year.
Mr Jenkins is expected to accept the award, the first time he has done so since taking over as chief executive in 2012, taking his total pay for 2014 to in the region of £5m.
City analysts are forecasting that Barclays’ profits will be higher than in 2013, while as Sky News reported earlier this week, the bank’s overall bonus pool will fall from just under £2.4bn to less than £2bn.
At Lloyds, Antonio Horta-Osorio’s annual bonus will be just under £1m, according to an insider.
The figure would have been higher based on Lloyds’ performance but was cut to reflect the bank’s £220m fine for its role in the Libor rate-rigging scandal, a source said.
Mr Horta-Osorio, who was recruited by the Treasury in 2011 to run bailed-out Lloyds, is also in line for a long-term share award dating back three years that would be worth around £7m.
Lloyds hopes to announce next week that it has gained permission to pay a dividend to shareholders for the first time since the banking crisis.
The chief executives’ annual bonuses account for only part of their overall remuneration packages.
Under reforms introduced by the European Banking Authority (EBA) last year, material risk-takers in banks now have their variable pay capped at 100% of their fixed pay, or twice that sum if shareholders have explicitly approved the move.
Investors in Barclays, HSBC and Lloyds have all approved the higher threshold, while RBS fought an unsuccessful private battle with the Treasury which culminated with it only being able to pay out bonuses equivalent to an employee’s salary.
The new rules have led to almost all major banks operating in Europe, including the big four UK institutions, introducing ‘role-based allowances’ to contend with the European cap.
These count towards fixed pay but can be adjusted on an annual or in some more cases more frequent basis, leading to a review by the EBA which may announce further restrictions on their payment in the coming weeks.
Mr Jenkins’ allowance is £950,000, which gives him aggregate fixed pay of £2.05m, while at Lloyds, Mr Horta-Osorio is paid a £900,000 allowance on top of his £1.061m salary.
The figures are clouded by the changing value of bank shares, which means that long-term awards made three years ago can be worth markedly more or less than they were at the point of their allocation.
The exception to the structure of the bank chiefs’ pay deals will be Ross McEwan, who runs Royal Bank of Scotland (RBS).
He is paid a £1m salary and from this year will receive a £1m role-based allowance, but is not entitled to an annual bonus following a decision by the taxpayer-backed lender to cease making such payments in order to minimise the prospect of a yearly public row over his remuneration.
Mr McEwan is, however, eligible for long-term share awards equivalent to the sum of his fixed pay.
None of the banks would comment ahead of the publication of their financial results or remuneration figures.