Bank says inclusion in US, but not UK, accounts of provision for payments to customers who were mis-sold PPI is simply a matter of timing
Lloyds Banking Group has told US regulators it made a loss last year – rather than the profit reported to the City authorities – because the bailed-out bank has included a £3.2bn provision for payment protection insurance in new regulatory filings.
Earlier this month, Lloyds said the provision for PPI would be taken in the first quarter of 2011, which forced the bank to consider whether there were any grounds for clawing back the bonuses paid to directors in 2010, including £1.45m handed to former chief executive Eric Daniels.
Directors' pay is based on the annual report filed in the UK, which shows a statutory pre-tax profit of £281m. The statement to the US regulators – known as a "20-F filing" – shows a statutory pre-tax loss of £2.9bn because the bank has increased its expenses from £13.2bn to £16.4bn to take account of the PPI provision.
In the filing, the bank also gives a clue about how the provision might change. "If the level of complaints had been one percentage point higher (lower) than estimated for all policies open within the last six years then the provision made in 2010 would have increased (decreased) by approximately £100m."
The bank explained the discrepancy between the UK and US as a matter of timing. It said: "The PPI provision is included in the 2010 20-F because, despite being a 2011 transaction, it is a material event occurring between the balance sheet date of 31 December 2010 and the audit sign-off date of 13 May 2011.
"For the UK equivalent, the audit date of 24 February 2011 was earlier than the date on which the provision was made so it wasn't included."
A separate regulatory re-filing, required under European rules, shows that the bank made £1.5m of payoffs to 12 staff last year, including one who received £800,000.
It also reveals that the bank employs 155 so-called "code staff" – those who, in the eyes of the Financial Services Authority are responsible for taking or monitoring risk – who were paid a combined £78.6m in 2010, some £38.6m of which was in cash. This average payment of just over £500,000 each is considerably less than those made to similar staff by rivals with large investment banking businesses.
For example, RBS has 323 people who meet these criteria, and together they shared pay of £375m in 2010 – an average of £1.1m each – while Barclays pays an average of £2.4m for its 231 key employees and HSBC around £1m, on average, for its 280 code staff.