Bonuses easier waived than ridiculous sense of entitlement

LONDON BRIEFING:Bankers may be bowing to public pressure but that doesn't signal a change in attitude, writes FIONA WALSH

ERIC DANIELS, chief executive of Lloyds Banking Group, has agreed to give up his 2009 bonus of £2.3 million (€2.6 million). Hurrah! A triumph of restraint over greed? A sign that, finally, those much-maligned bankers are beginning to mend their ways?

Not a bit of it: even as Daniels became the fourth bank boss in the past week to waive his bonus, the Lloyds chief executive – and his board – just had to let everyone know that he was still worth every penny.

In a statement detailing the £1 million-a-year chief executive’s gesture, Lloyds revealed that its remuneration committee awarded Daniels the full payout under the bank’s bonus scheme, a decision which was endorsed by the entire Lloyds board. Behind this was their chief executive’s “significant individual contribution” and the group’s overall performance over the past year.

But in judging that a payout was due at all, whether or not it would be taken, the Lloyds directors reveal just how far removed they are from the real world.

Bankers may be bowing to political and public pressure on bonuses now, but beneath all that the reward culture remains the same, even in a bank that has been bailed out by the taxpayer.

Stephen Hester, chief executive of the state-controlled Royal Bank of Scotland, has also let it be known that he will waive his entitlement to a £1.6 million bonus, although he is thought to be determined to push through payments topping £1 billion to be shared among RBS’s 22,000 investment bankers.

In turning down the £2.3 million, Daniels spoke of the danger that the bank’s progress would be “obscured by the current debate on executive bonus awards in the banking sector”. But the reality is that both he and Hester had little choice but to make their sacrifices after John Varley and Bob Diamond, respectively chief executive and president of Barclays, said last week that they were forgoing their own payouts even though their bank achieved record profits.

Results from RBS and Lloyds due at the end of this week will be very different from the £11.6 billion reported by Barclays. Between them, the two are expected to rack up extensive losses, rendering the notion that their chief executives are “entitled” to bonus payments even more ridiculous.

The losses at Lloyds, which reports on Friday, will largely stem from its disastrous takeover of HBOS – a deal presided over by one Eric Daniels. Such is the uncertainty over the performance of HBOS, analysts are forecasting losses in a wide range of between £3 billion and £13 billion.

There will be news of a significant reduction in losses at RBS, which reports on Thursday, but that’s not much of an achievement given the record-breaking loss of £24 billion suffered in 2008.

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IT’S not often these days that a chief executive can describe market conditions as “very positive”, but that was, if anything, an understatement earlier this week from Barry Stevenson, who runs Albemarle Bond.

As Britain’s biggest pawn-broking chain, Albemarle Bond is benefiting not only from the woes of its cash-strapped customers but also from the soaring price of gold, which has encouraged many consumers to cash in on their old jewellery.

Profits for the six months to the end of December leapt by 75 per cent to £10.8 million and the company looks on course to push its full-year total up to a record £18 million. It aims to make the most of the growing demand for its services by doubling its retail chain to around 250 outlets over the next five years.

There’s only so much old gold consumers can sell, however, so that side of the business will see a slowdown at some point. The core pawnbroking business will continue to do well while people struggle to raise cash, although once the banks start providing credit again, Albemarle’s monthly interest rate of almost 8 per cent will not look quite so attractive.

For now though, the company is one of the lucky beneficiaries of the recession and its fortunes are in stark contrast to the rest of the retail sector, which last month suffered its worst sales figures in a year and a half. Volumes in January tumbled by 1.8 per cent and, while this reflected the heavy snowfall which swept across the country and the increase in VAT, the data raised fears that Britain could be in for a double-dip recession.

Even the booming online shopping sector is feeling the impact of the prolonged downturn, with sales last month rising by only 5 per cent, their slowest rate in almost 10 years. Industry experts are still predicting double-digit growth in online retailing for the year as a whole, however.

Fiona Walsh writes for the Guardiannewspaper in London