Man at Pru gets £7.5m a year pay

LLOYDS sold TSB to a Spanish bank at a staggering loss of around £2.5bn, it emerged yesterday.

Announcing a sharp fall in profits in the first quarter, the taxpayer- backed banking group confirmed it had incurred a £660m charge from the sale of challenger bank TSB to Spanish lender Sabadell.

Most of this bill – around £450m – was incurred in IT costs, which it has been forced to pay by European regulators. This adds to around £2bn it has already spent on offloading the branches.

Last night campaigners described the latest charge as a blow to taxpayers – who still own just under 21pc of Lloyds.

The lender was ordered by the European Commission to sell 631 branches as a condition of its £20bn bailout in 2009. The sale of the branches was intended to boost competition and create a new force on the High Street.

But getting rid of the outlets – an undertaking given the codename Project Verde – has proved a long, painstaking and expensive process.

In 2013 the Co-op was forced to abandon a £750m bid for Verde after a £1.5bn black hole was discovered in the mutual bank’s finances. That revelation forced Lloyds to go back to the drawing board.

It launched the branches under the old TSB banner in September 2013, bringing back the brand that disappeared from the High Street almost 20 years earlier.

As part of its deal with European regulators, Lloyds also had to commit to paying to transfer the IT systems across to any company that agreed to buy it.

Yesterday it said this had cost the bank £450m, with another £150m spent on administration and VAT.

Jonathan Isaby, chief executive, of the Taxpayers’ Alliance, said: ‘This highly unusual arrangement demonstrates once again that taxpayers shouldn’t be propping up what should be private banks.

‘For as long as these shares are stuck in the public sector, taxpayers will be on the hook for enormous tabs like this.’

Lloyds stands to generate around £1.5bn in total from offloading TSB, but all of that and more will be wiped out by the costs and charges it has incurred. The sum raised from TSB includes around £640m from floating half of the bank on the stockmarket.

In addition, Lloyds will receive around £850m from its share of the £1.7bn sale of the rest of the lender to Sabadell earlier this year.

The takeover has not yet been completed. But if it is given the green light, almost all that money will be used to replenish the cash that it had to pump into TSB to ensure it had enough capital to run as a separate bank. That leaves the total loss incurred by Lloyds at around £2.5bn. The latest £660m charge drove profits down by 11pc to £1.2bn in the first three months of the year. The underlying profit of the bank – stripping out ‘exceptional costs’ – jumped 21pc to £2.2bn.

Lloyds benefited from the improving economy with losses from bad loans falling 59pc from a year ago to £177m.

But perhaps the biggest relief for investors was the lack of any further provisions for wrongdoing.

Lloyds has been forced to set aside more than £12bn to compensate its customers who were missold PPI.

More than £4bn was added to the value of Lloyds yesterday as shares soared more than 7pc to 82.87p.

The surge provides a timely boost to the Chancellor ahead of the election next week.

The Tories have committed to selling billions of pounds of government shares in Lloyds to small investors if it wins power.

The Government has raised more than £ 9.5bn after selling off more than half its initial 43pc stake in Lloyds. THE new ‘man at the Pru’ will receive a pay package worth up to £7.5m a year, it emerged yesterday.

Mike Wells was officially unveiled as the chief executive of the insurance giant.

The US citizen, who was born in Canada, will take over from Ivorian Tidjane Thiam who is taking the helm at Credit Suisse.

Wells was widely expected to get the top job. He is a 20-year veteran at the Pru and has run its Jackson National Life business in the US since 2010.

His package includes a basic salary of £1.07m, a maximum bonus of 200pc of salary, with 40pc of any bonus deferred into Prudential shares.

The new boss will also receive performance-related long-term incentive awards worth up to four times his salary. The Pru (down 17p to 1612p) will also pay for him to relocate from the US to London, although no further details were provided yesterday.

Wells is no stranger to lavish pay packages, having scooped £11.4m in pay and perks last year – as he became eligible to cash in shares from a long-term bonus.

The insurance and fund management industry has come under increased scrutiny over fat-cat pay, with the Institute of Directors warning largesse in the sector could become the next corporate scandal.

Prudential’s chairman Paul Manduca said the insurer had found a ‘fitting and experienced’ successor to Thiam, who has been widely praised for his six-year stint as chief executive. Thiam landed a pay package worth £11.8m last year.