CITY FOCUS: Lloyds investors vent frustration at bank’s annual meeting
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UPDATED:
20:57 GMT, 17 May 2012
On A damp, overcast day in Edinburgh, Lloyds’ long suffering shareholders and pension savers got their chance to vent their frustration at the bank’s top executives.
There was no Shareholder Spring- style rebellion, but one pensioner did complain about the quality of the biscuits.
A smattering of disgruntled Lloyds customers – outnumbered by the photographers they were posing for – braved the May drizzle to cut up their credit cards.
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On the cards: Some shareholders cut up their credit cards at the bank's annual meeting
At most, the state-backed bank’s annual meeting could be described as a weary skirmish between bankers in expensive suits and a half-full auditorium dominated by pensioners decked out in blazers, Sunday-best dresses and smart jumpers.
Crucially, Lloyds managed to avoid the backlash over pay that has bloodied a succession of firms, including Aviva, Barclays and Prudential, claiming a number of ‘fat-cat’ bosses on the way.
As expected, almost 98 per cent of votes backed the remuneration report which sanctioned the banks’ bonuses. Almost 100 per cent of votes rubber stamped the bank’s annual report.
But the North Korean-style voting majority belied the deep-seated resentment from investors who have seen their pensions and savings whittled away as the bank’s share price plunged from over 4 before the financial crisis to less than 28p.
Shareholders questioned the right of Lloyds to dish out bonuses at all when the bank lost 3.5bn last year, was bailed out with more than 20bn of taxpayers’ money and hasn’t paid a dividend in almost four years.
One pensioner drew rare applause when he said: ‘I don’t see any alignment between directors’ remuneration and what happened to shareholders. I think we should all share the pain.’
Another who invested in the bank at more than 4.50 per share, said: ‘I gave 40 years of my life to Lloyds as front-line member of staff, man and boy. My retirement has been made miserable. I have lost a small fortune.’
Even its critics would concede Lloyds has gone to greater lengths than some of its peers to diffuse anger over pay, despite recently sanctioning a 6m ‘golden hello’ for new finance chief George Culmer.
In January, Lloyds’ chief executive Antonio Horta-Osorio waived his bonus of up to 2.4m after taking extended sick leave due to a severe bout of insomnia.
The bank has also used new powers to claw back millions of pounds in bonuses from former directors embroiled in the toxic rescue takeover of HBOS and the payment protection insurance mis-selling scandal.
In both cases, its state-backed rival Royal Bank of Scotland was left trailing, with its chief executive Stephen Hester only forfeiting his bonus after months of media and political pressure.
There was also much incredulity about the bank’s compensation bill for mis-selling payment protection insurance, which recently climbed another 375m to almost 3.6bn.
This costly scandal caused Lloyds to slump to a 3.5bn loss last year.
Horta-Osorio said increasing its provision was the ‘right thing for customers’ and ‘provided clarity for shareholders’.
He said he was changing the bank’s culture to provide more transparent products, value for money and incentives, which encourage staff to do the right thing for customers.
But this failed to convince Wendy Dunsmore from trade union Unite who called on the bank to eradicate the bonus culture that contributed to the PPI scandal.
She accused Lloyds of setting sales staff unrealistic bonus targets, pointing to a recent Unite survey indicating that 85 per cent of respondents working at the bank were suffering from high stress levels.
She said: ‘The failure to hit targets can result in disciplinary action and dismissal. This creates a culture of excessive risk.’
Inevitably, the question of when Lloyds will be able to resume paying dividends featured at the top of the agenda. Investors received the usual assurance that dividends would paid as soon as it was financially viable.
Horta-Osorio also sought to assure investors that the bank would be back on its feet within two to four years, and in a fit state to be sold back to the private sector.
This is a far more optimistic prognosis than that made by powerful institutional shareholders earlier this year.
And earlier this week, investment bosses at Standard Life, Royal London and Schroders told the Treasury Select Committee that the process could take five years or more.
After airing their grievances during a meeting lasting almost four hours, Lloyds shareholders cast their votes and went back to their tea and biscuits.
Many will, no doubt, be back next year.