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Lloyds Banking Group (LSE:LLOY) share price is currently trading 78.19 pence, down slightly from the 80 pence mark it had reached at Friday’s close. The share price has been climbing steadily through this calendar year, in effect, doubling in value from one year ago. If the share price continues to remain above 73.6 pence for 30 days, which it surpassed on 09 October, CEO Antonio Horta-Osario will be awarded a bonus of 3 million shares. Is that fair when the bank is still trying to dig its way out of the hole it put itself into?
Frankly, I don’t know the answer to that question. Horta-Osario seems to be taking the bank in the right direction, at least according Lloyds results for Q3 2013 released this morning.
In it, the CEO said that “In the first nine months of 2013, we significantly improved the Group’s underlying and statutory profitability, with margin expansion, core lending growth and a gain from the sales of shares in St. James’s Place all supporting income growth, while costs and impairments continued to fall as we further simplified the business and de-risked the balance sheet. The third quarter saw us return our mortgage book to growth and we again increased lending to both SME customers and other corporates. Non-core asset reductions continued to be capital accretive and underlying losses from the portfolio declined significantly. The Group’s capital position has advanced considerably in the year to date despite further charges for legacy PPI business, while our funding position remains secure and our liquid asset buffer prudent.”
Horta-Osario noted examples of the bank returned to sound operations, including:
- Improved capital position in spite of yet another additional charge to “legacy” PPI abuse. It amazes me how “crimes of the past” get turned into a “legacy.” Hey, I’m not that stupid. I understand the terminology and its business application. I’m just saying.
- Reduction of non-core assets is moving ahead of plan, including the fact that the bank’s year end objective has already been reached.
- The bank’s core loan book is exhibiting growth in all divisions.
- Underlying profit for Q3 (£1,524 million) was up 7% from Q2 2013 and up 83% over Q3 2012.
- Underlying profit has increased 136% during the first three quarters of 2013 to £4,426 million.
- Earnings per share are still in positive territory YTD, although, for the quarter, they have increased 200% to (1.8) eps.
- Loss for the period was (£1,298 million) as opposed to (£374 million) for the same three month period in 2012.
- Profit YTD was £280 million.
Overall, not a bad report. But, let’s go back to the CEO bonus.
Here’s the thing that puzzles me. Do they award the Claret Jug after 18, 36, or 72 holes? The answer is “No.” They award it when the match has been won. Why then, would such a bonus be paid before the bank fully completes the course to privatization? It simply makes no sense. Nothing against Horta-Osario. He didn’t put the bank in this position, and he is taking it in the right direction.
Oh well, I can’t fix it. I’m going to move on to something I might be able to do something about, like the leaky faucet in the kitchen.
