Business Context and Reporting Period
This Form 6-K filing by Lloyds Banking Group Plc, dated February 20, 2019, serves as a Summary Remuneration Announcement. It details the 2018 remuneration outcomes for Persons Discharging Managerial Responsibilities (PDMRs), including Executive Directors, and outlines upcoming awards for 2019. The filing aligns executive pay with the Group's strategic objectives and shareholder interests.
Key Financial Metrics
- Statutory Profit Before Tax: Increased 13% to £6 billion.
- Underlying Profit: Increased 6% to £8,066 million.
- Cost:Income Ratio: 49.3% (described as market leading).
- Dividend: Ordinary dividend increased to 3.21 pence per share.
- Share Buyback: Up to £1.75 billion.
- Group Performance Share Pool (2018): £464.5 million.
- Gender Pay Gap: Reduced by 1.3% to 31.5%.
Material Changes Versus Prior Period
- Profit Growth: Statutory profit rose 13% and underlying profit rose 6% compared to 2017.
- Executive Remuneration: Executive Director single figure remuneration is 2% lower than 2017; the Group Chief Executive's single figure is approximately 2.5% lower.
- Performance Share Awards: Group Performance Share awards for Executive Directors are 11-12% lower than 2017. The total pool decreased 3% year-on-year (adjusted for eligible population changes).
- LTIP Vesting: The 2016 Long Term Incentive Plan (LTIP) vested at 68.7%, compared to 66.3% for the 2015 LTIP. However, the Total Shareholder Return (TSR) component of the 2016 LTIP resulted in 0% vesting due to share price performance.
- Pay Budget: A 2.6% pay budget was set for all colleagues, with 3.5% for lower grades and 2% for Executive Directors.
Guidance, Outlook, and Management Commentary
Management highlighted strong financial and strategic performance in 2018 despite political and economic uncertainty, which weighed on the share price. The Group's resilient, low-risk business model supported underlying performance and a strengthened capital position.
Remuneration Principles: The Remuneration Committee emphasized that variable components must be truly variable. Despite strong financial results, the Group Performance Share was reduced relative to the prior year due to collective adjustments reflecting risk considerations, reputation, and conduct issues.
Future Awards:
- 2019 Base Salaries: Increases of 2% for the CEO and CFO; no increase for the Group Finance Director.
- Deferred Awards: 60% of variable remuneration for Executive Directors is deferred into shares, subject to clawback for at least seven years.
- Shareholding Requirements: Executives must maintain shareholdings of 350% of base salary (CEO) or 250% (other Executive Directors).
Risks and Contingencies: The filing includes standard forward-looking statement disclaimers regarding economic conditions, Brexit, regulatory changes, cyber threats, and market volatility. Specific risks cited include the impact of the UK's exit from the EU and potential sovereign credit rating downgrades.
Important Facts for Investor Verification
- Verify the final number of shares awarded for 2018 Group Performance Shares, as current figures are based on an assumed share price of 58.32 pence.
- Confirm the actual vesting value of the 2016 LTIP, noting the 0% vesting on the TSR component due to share price performance.
- Review the full Annual Report and Accounts for detailed performance metrics of individual Executive Directors.
- Monitor the execution of the £1.75 billion share buyback program.
- Check for any updates on the 2019 Fixed Share Awards, which are subject to share price determination on the date of award.