Executives Deserve More Pay At RBS!

Piggy bankClearly, the remuneration of top executives at leading UK banks such as RBS (LSE: RBS), Barclays (LSE: BARC) (NYSE: BCS.US) and Lloyds (LSE: LLOY) (NYSE: LYG.US) continues to be a political hot potato. Indeed, it seems as though the majority of people feel that senior bankers are vastly overpaid and that, as such, their salaries and bonuses should be slashed immediately. After all, they caused the credit crunch, didn’t they?

However, it could also be argued that the management teams at RBS, Barclays and Lloyds deserve far higher salaries and bonuses. Here’s why.

A Return To Profitability

After a hugely difficult period, where Lloyds and RBS made vast losses and Barclays saw profit shrink to a fraction of its pre-credit crunch level, all three banks are set to deliver impressive levels of profitability in the current financial year. This may not seem like a great achievement, but when you consider that the banks have been forced to endure the seemingly never-ending PPI claims (which has already cost them £billions in compensation), the worst financial crisis in living memory (which began less than seven years ago) and the fact that they have endured huge amounts of political pressure and upheaval, delivering a profit in the current year has not been easy.

Furthermore, RBS, Lloyds and Barclays are all forecast to deliver above-average earnings per share (EPS) growth next year, too. For instance, RBS is expected to see earnings grow by 18%, Barclays by 24% and Lloyds by 8% — all of which are impressive figures and show that the banks are making a serious comeback, for which management should be duly rewarded.

A Stronger Position

The management of RBS, Barclays and Lloyds have also been able to strengthen their respective balance sheets and reduce the riskiness of their operations. This has been done in a relatively short timeframe and has been done very effectively, with all three banks having smaller balance sheets than before the credit crunch, with more work to be undertaken in this area. They have also improved their capital ratios and provided sufficient (although not excessive) credit to support the growth of the UK economy, which is bearing fruit with stronger than expected GDP numbers. Surely management should receive a generous bonus for this achievement?

Looking Ahead

Although investor sentiment remains relatively weak surrounding the banks, they offer investors vast potential. Their return to high levels of profitability will bring generous dividends and could see demand increase for shares in future. A handful of years ago, none of this seemed possible. The banks were literally on the brink. Surely the individuals who brought them back to life deserve their fair share of the profits?

Of course, whether you agree or disagree that bankers are paid fairly, there's more to the banks than executive pay. That's why the team at The Motley Fool has put together a free and without obligation report on the UK banking sector that could help you to take advantage of a potentially lucrative sector.

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Peter owns shares in RBS, Lloyds and Barclays.