Hot Features
Premium
Register for real-time alerts, custom portfolio, and market movers
According to CEO Antonia Horta-Osorio, Lloyds Banking Group (LSE:LLOY) is now back to normal. We can’t be sure whether he said that in his lengthy commentary in the group’s 2013 final results to calm investors about the status of the bank or about the size of his bonus. Whatever he meant, it probably hasn’t been getting the investor, analyst or press response that he had hoped for. Lloyds’ share price has fallen during the last two trading sessions from 83.53 to 80.06.
Is there anyone in the UK that perceives “normal” in the banking sector as anything different than a group of silver-tongued pirates who lure customers into the banks so that they can steal their hard-earned wages, fleecing them and putting the ill-gotten gain in their own pockets. Where is Robin Hood when the banks are robbin’ us?
Critics are hitting Horta-Osorio primarily on two fronts: deceptive reporting and defining normal. The two concepts go hand in hand. Speaking of Robin Hood, a representative of the Robin Hood Tax Group said today that, “It’s disgraceful that a bailed-out bank gets fined billions for ripping off its customers, but still pays out lottery-sized sums to its top staff. In what other industry would this be allowed to happen?”
Deceptive reporting is simply reporting the facts in the best possible light. Horta-Osorio has a bit more wiggle room that Napoleon, who might have spun Waterloo in similar fashion by announcing that “After a long and successful career, I have decided to retire from public life.”
Horta-Osorio used his definition of normalcy to increase the executive bonus pool by eight percent. The problem is that it is possible, depending on how one analyzes the bank’s performance, to say that the bank is improving. It is also possible to say that it is not. Stop and think for just a second – this is the bank that just two months ago – December 2013 – got body-slammed with a £28 million fine for failing to properly manage its bonus schemes. Hello!
It was just a few days ago in my story on 04 February, “ARM Holding Strong Despite One-Off Charges,” that I discussed normalized financial reporting. In that story, I advocated the practice as a means of theoretical removal of one-off charges as a means of helping investors and stakeholders understand the health of the company, had those one-time losses (or gains) not happened. The problem with Lloyd’s is that they keep reporting recurring legacy issues as one-off. By simple definition, “one-off” cannot be recurring.
So here’s my problem – and it should be your problem too: If someone almost whimsically counts recurring charges as one-off charges, how does that person understand what is normal? In this case, we are not talking about an eighth-grader with a learning disability, we are talking about the CEO of one of the UK’s major banking institutions. Which leads me to believe that Horta-Osorio’s comments were not a slip of the pen or a typo. They were well-crafted and intended to be deceptively misleading.
If this is Horta-Osorio’s concept of normal, we are all in trouble.
