State-backed Lloyds Banking Group has swung back into profit, delivering a £1.7 million ($2.8 million) bonus for its chief executive despite amassing £10.3 billion in misselling provisions in the last three years.
Chief executive António Horta-Osório said it was right to accept his bonus – and to increase the wider £395 million bonus pot for Lloyds' 91,000 staff. The average £4,500 represents an 8 percent uptick on last year, something Mr Horta-Osario said was conservative given the exponential improvement of the bank's performance.
"I think you should link compensation to performance. The group has made excellent progress and our share price is up 70pc in the year – significantly better that all of our peers. We are the best performing of the top 50 banks in the world over the last 24 months. Given this performance, the government is in a position to sell down its stake.
(Read more: Lloyds share sale closer after profit hike)
"We are," said Mr Horta-Osario, "becoming a normal bank again.
"Therefore I will take this bonus because I think it will align my interest with shareholders and that includes the taxpayer."
Lloyds, which has more retail banking customers than any other bank in the U.K. needed a £20 billion pound bailout at the height of the financial crisis in 2008. The bank and the U.K. coalition government have since been working to sell off the state's stake.
The multimillion-pound deal is contingent on Mr Horta-Osario overseeing the government's exit, below 50 percent of the bank's share capital.
"I came here to the bank to fix the bank. If,in five years'time, these conditions haven't been met, I won't get an award and later it can be clawed back."
Leading investors, who are all very supportive of the Portuguese boss, said that they were less pleased with the amount of provisions the bank is still having to announce for the misselling of payment protection insurance (PPI) on customer loans.These latest results revealed a fourth-quarter provision of £1.8bn.
One top 10 shareholder told CNBC that the recent PPI sting had come as a "shock" and a "massive disappointment".
"We had hoped that a line was being drawn under these jumbo claims," said another investor.
In total, Lloyds has been forced to put aside £10.3 billion in provisions for PPI misspelling and interest rate swap misspelling to its customers, which the bank said had been taken into consideration when increasing the bonus bool by just 8 percent.
However, the PPI pay-outs to customers subdued Lloyds' stellar underlying profits of £6.2 billion leaving it with just £415 million in pre-tax profits compared to a £606 million loss for 2012.
"It is really crap , I'm not sure what else I can say," said one frustrated top 10 shareholder.