Lloyds Banking Group has announced a substantial overhaul of its executive pay policy, which could see its chief executive, Charlie Nunn, earning up to £17.7 million this year. This significant increase comes as the bank reported a 12% rise in pre-tax profits, reflecting a robust financial performance amid challenging economic conditions.
Executive Pay Package Sees Notable Increase
In its latest annual report, Lloyds revealed that Nunn’s total remuneration surged to £7.4 million in 2025, up from £6.2 million the previous year. This increase is attributed to a higher base salary, a larger annual bonus, and enhanced long-term share awards. The report praises Nunn’s “strong leadership” through a testing year for consumers, highlighting his role in steering the bank through turbulent times.
Similarly, Chief Financial Officer William Chalmers experienced an 18% increase in his total pay, bringing it to £5 million for the year. These payouts come in the wake of Lloyds’ impressive financial results, which saw the bank report a pre-tax profit of £6.7 billion for 2025.
Changes to Compensation Structure
In an effort to link executive pay more closely with the bank’s financial performance, Lloyds has proposed significant changes to its compensation framework. Among the key adjustments is an increase in the maximum annual bonus for the chief executive, which would rise from 140% to 300% of base salary. Additionally, the long-term incentive plan limit would increase from 300% to 500%.
The bank’s strategy also includes a reduction in fixed pay by approximately 44%, ensuring that there are greater consequences tied to performance outcomes. As a result, if Nunn meets all his performance targets, he could receive a total of £13.9 million this year. Moreover, in the event of a 50% increase in Lloyds’ share price, his earnings could escalate to the aforementioned £17.7 million.
Context of the Financial Landscape
Lloyds’ proposals come at a time when the financial sector is adjusting to rising profitability and increased scrutiny over executive compensation. The bank’s share price surged by around 75% last year, reflecting a positive market response to its financial health. Comparatively, other banking executives have also seen significant pay increases; for instance, CS Venkatakrishnan of Barclays was awarded a £15 million pay package, while NatWest’s Paul Thwaite’s total remuneration rose by a third to £6.6 million.
As shareholders prepare to vote on Lloyds’ new pay policy at the upcoming annual general meeting, there is a broader conversation about the ethics of executive compensation in a sector that often faces criticism for high pay levels amid varying economic conditions.
Why it Matters
The restructuring of Lloyds’ executive pay policy highlights a critical shift in how financial institutions are approaching compensation in a recovering economy. By tying pay more closely to performance and introducing substantial potential rewards, Lloyds aims to align the interests of its leaders with that of shareholders and customers alike. As the banking sector grapples with public perception and accountability, these changes could set a precedent for how other institutions manage executive remuneration in the future.
