Remuneration report

We consider the views of all of our stakeholders in remuneration decision making. In 2020, we have achieved this by meeting with institutional shareholders to understand their views on our new policy (including how it should be implemented), engaging extensively with our regulators to support their actions as a result of the pandemic, and continuing our partnership with Unite in the UK to understand the views of their members and negotiate a new pay deal, delivering an above-inflation increase. We used our 2019 Fair Pay report to share information on our approach to pay with colleagues, including how executive remuneration aligns with wider company pay policy, and are now publishing our third report to help do the same for 2020.

Rewarding sustainable performance remains a crucial aspect of the way the Committee considers its decisions. We recognise the pandemic’s impact on our financial performance, but remain proud of what we have achieved as an organisation in a difficult year. Not only have we remained fully open for business, supporting our customers and clients as they navigate the COVID-19 pandemic, we also demonstrated financial resilience, remaining profitable in each quarter despite the challenging macroeconomic environment, while continuing to demonstrate a capacity for strong capital generation.

Our business diversification has meant that our investment banking businesses have been able to benefit from the increased volatility and wider trading margins observed during 2020. This, together with strong relative performance as evidenced particularly by the continued improvement in Markets market share, has meant that these businesses have significantly outperformed expectations. As a result, Group income was up on 2019 despite an incredibly challenging year for our Corporate Bank and consumer businesses, impacted as they were by lower income and materially higher impairment charges in the wake of the pandemic.

We have delivered an enormous amount of financial support for our customers and clients this year, including facilitating c.£27bn of finance to British businesses, waiving millions of pounds in fees for customers and helping corporate clients and governments raise billions to strengthen their balance sheets (underwriting c. £1.5 trillion of new issuance). We have been able to do a significant amount for wider society too, whether through the launch of our £100m COVID-19 Community Aid Package, or in the steps we have taken on the road to becoming a net zero bank by 2050.

The Committee has approved a Group incentive pool of £1,580m. This represents a relatively modest increase across the investment banking businesses, reductions for all other businesses and appropriate recognition for the contributions of our more junior colleagues. We believe that this outcome is appropriate given the performance delivered, and that it is consistent with our philosophy of rewarding sustainable performance, which in turn supports our long-term strategy of delivering improved returns to shareholders.

The Committee has considered the appropriateness of bonus and LTIP outcomes for the Executive Directors for 2020. Annual bonuses were assessed against the financial, strategic and personal measures that were set out in the Directors’ Remuneration Report for 2019. While Group income was up slightly year on year and costs well controlled, the impact of the pandemic on impairment resulted in significantly reduced 2020 bonus outcomes, 38.6% of maximum for the CEO and GFD, down materially from the outcomes for 2019 (75% and 75.9%, respectively). Similarly, the outcome for the 2018-2020 LTIP was also materially impacted by impairment, with an outcome of 23% of maximum, down from 48.5% for the 2017-2019 LTIP.

We believe the outcomes on both bonus and LTIP align appropriately with stakeholder considerations. They take into account financial performance outcomes, very strong non-financial delivery and the exceptional contributions of the Executive Directors – both the outstanding leadership provided during the year, and the positive impact of a multi-year strategy and transformation that has enabled us to continue to deliver so effectively for stakeholders during a time of such challenge.

Further details on Executive Director remuneration, including the consideration of windfall gains on the 2020-2022 LTIP, and the full details of the new LTIP to be granted for 2021-2023 are set out in the Directors’ Remuneration Report.

We will ensure that the new Purpose, Values and Mindset are reflected in our remuneration policies and approaches, as we work to embed them throughout the organisation. We will also continue to focus on our Fair Pay agenda throughout the year, looking for further opportunities to simplify pay and increase transparency where we can.