Business Context and Reporting Period
This Form 6-K filing by Lloyds Banking Group Plc, dated February 24, 2021, serves as a voluntary Summary Remuneration Announcement. It supplements the Directors' Remuneration Report to provide transparency on awards for Persons Discharging Managerial Responsibilities (PDMRs) for the 2020 performance period. The announcement details the impact of the 2020 coronavirus pandemic on executive pay, colleague support measures, and the vesting of long-term incentives.
Key Financial Metrics and Remuneration Outcomes
The filing focuses on remuneration outcomes rather than full corporate financial statements, though it references specific profit figures to justify bonus decisions.
- Underlying Profit (2020): £2.2 billion.
- Profit Target (2020): £5.7 billion.
- Profit Variance: Actual profit was 62% below the target, failing to meet the threshold for annual bonus awards.
- Group Chief Executive (GCE) Total Remuneration (2020): £3.44 million, representing a 22% decrease year-on-year.
- Total PDMR Awards (2020 Performance): £4.1 million in Long Term Share Plan (LTSP) awards.
- Total Senior Colleague Awards (2020 Performance): £32.9 million.
- Colleague Support Awards: A one-off £250 cash award to ~40,000 customer-facing colleagues and a £400 share award to all permanent eligible colleagues.
Material Changes Versus Prior Period
- Annual Bonus Pool: No Group Performance Share (annual bonus) awards were made for 2020 due to the profit threshold not being met. This contrasts with prior years where bonuses were awarded.
- Executive Waivers: Members of the Group Executive Committee waived their right to be considered for a 2020 bonus in April 2020.
- LTSP Reduction: Long Term Share Plan awards for 2020 performance were reduced by 40% to reflect Group performance and shareholder experience. The Chief Financial Officer's award was set at 75% of base salary (reduced from a normal range of 125-150%).
- Shareholding Policy: The Group temporarily suspended the shareholding policy requirement until January 2022 due to the significant impact of the economic climate on share prices.
- Performance Adjustment: A performance adjustment was applied to the Chief Risk Officer's deferred bonuses from 2011-2015 due to an FCA fine regarding mortgage arrears handling.
Guidance, Outlook, and Management Commentary
Stuart Sinclair, Chair of the Remuneration Committee, emphasized restraint in executive remuneration outcomes to reflect the experiences of customers and shareholders during the pandemic. The Committee highlighted a "one team" ethos, ensuring support was targeted toward customer-facing colleagues.
- Future Awards: LTSP awards for 2020 performance are expected to be granted in March 2021. Vesting is subject to three financial underpins and spread between the third and seventh anniversary.
- Executive Departure: No LTSP award was made for the Group Chief Executive, António Horta-Osório, as he is scheduled to leave the Group in April 2021.
- Recovery Participation: The Committee intends that if Group Performance Share awards are made for 2021, they should participate in any recovery in profitability to ensure fairness.
- Risks and Contingencies: The filing includes a standard forward-looking statement disclaimer citing risks such as economic conditions, Brexit, regulatory changes, cyber threats, and the ongoing impact of the pandemic.
Important Facts for Investor Verification
- Verify the exact vesting conditions and underpin thresholds for the 2020 LTSP awards granted in March 2021.
- Confirm the final share price used for the £400 colleague share award and the £32.9m senior colleague awards, as these are estimates based on a share price of 38.50 pence.
- Monitor the status of the suspended shareholding policy and its potential reinstatement in January 2022.
- Review the specific financial underpins (Absolute Total Shareholder Return, Statutory Economic Profit, Cost:Income Ratio) that determine the vesting of the 2020 LTSP awards.
- Check the Annual Report and Accounts for full details on the £2.2bn underlying profit and the specific provisions related to the FCA fine mentioned in the performance adjustment.