Lloyds Says Additional Branch Sales Not Part of EU-U.K. Deal

A legal agreement between Lloyds Banking Group Plc, the European Union and the British government capped branch sales at 600 and not “even one branch more,” according to the bank’s Chairman Win Bischoff

Lloyds was told 18 months ago to sell the outlets by November 2013 as part of an agreement with the EU following its receipt of more than 20 billion pounds ($32 billion) of taxpayer aid during the financial crisis. Last month, the British-government appointed Independent Commission on Banking proposed that the London-based bank sell “substantially” more outlets.

“We’ve made a deal which is 600, anything, even one branch more is obviously not,” said Bischoff in an interview at the bank’s annual general meeting of shareholders in Glasgow today. “There is a legal agreement which was made between Brussels” the U.K. Treasury and the bank, he added.

The EU agreement stated in November 2009 that the bank must sell “at least” 600 branches in England and Wales and give up 4.6 percent of its share of the U.K. checking account market. The bank is seeking “evidence” from the ICB “which would suggest that a substantial increase would be justified,” Bischoff said.

Lloyds plans to find a buyer for the 600 branches, termed “Project Verde” by the bank, before the end of the year, Bischoff said.

Separately, Bischoff said the bank showed “restraint” by trimming the bonus paid to former Chief Executive Officer Eric Daniels.

“The remuneration committee considered the substantial progress that has been achieved in 2010 under Eric’s leadership,” Bischoff said. “At the same time, we felt it was appropriate to show restraint and accordingly we reduced his bonus to less than he would otherwise have been paid.”

‘Substantially Less’

Daniels is entitled to 2.57 million pounds ($4.16 million) in pay and bonuses for 2010, the London-based bank said in its annual report. The bonus amounted to 1.45 million pounds compared with a maximum possible of 2.33 million pounds, a spokesman said today. That was “substantially less than the maximum,” Bischoff said.

Daniels, 59, led the bank’s takeover of HBOS Plc, the U.K.’s biggest mortgage lender in 2008, whose losses led the bank to cede a 41 percent stake to the government and seek a taxpayer-funded bailout. He was replaced by Antonio Horta-Osorio, 47, in March.

Private shareholders criticized of the board and particularly bonus payments to executive directors.

“When someone makes a mistake you don’t keep him on and pay him a bonus,” said shareholder David Harrison at the meeting.

Remuneration Vote

Shareholders voted 91.9 percent in favor of the bank’s remuneration report today, almost the same as last year’s vote giving 91.5 percent support.

Lloyds reported a net loss of 2.4 billion pounds in the first quarter of this year after setting aside 3.2 billion pounds to compensate clients who were improperly sold loan insurance.

“We have given Eric no more than he was entitled to under legal contract,” Bischoff said. According to a bank spokeswoman, Daniels had not yet decided whether to accept the bonus award. Bonuses “are a result of performance,” said Tony Watson of the Lloyds remuneration committee.

Lloyds closed 0.2 percent lower at 53.6 pence in London today and has declined by 18 percent in the year to date, the worst performance in the FTSE 350 Index of Britain’s five biggest banks.

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