By Matt Scuffham
EDINBURGH, May 14 (Reuters) - State-backed Lloyds BankingGroup is braced for tough questions from shareholdersat its annual meeting on Thursday over a 7.8 million pound($13.1 million) pay package handed to Chief Executive AntonioHorta-Osorio.
The bank, which is 25 percent-owned by British taxpayers,said in March that it expected Horta-Osorio to be paid 4.9million pounds this year but his package could be worth almost 3million more if targets are hit.
Banks across Europe have come under fire from the public,shareholders and politicians for rewarding staff lavishly at atime of austerity that was partly brought on by reckless lendingby some financial institutions.
Lloyds and part-nationalised Royal Bank of Scotland are subject to greater scrutiny than rivals after the governmentpumped a combined 66 billion pounds into the banks to keep themafloat during the 2008/9 financial crisis.
In April, the government blocked plans by RBS to pay bonusesworth double an employee's fixed salary but said it wouldsupport Lloyds' plans to do the same. That proposal will bevoted on by shareholders at the annual meeting.
Unlike RBS, Lloyds has returned to profit and the governmenthas begun selling shares in the bank. Horta-Osorio has turnedthe bank's financial performance around, slimming the companydown to focus on domestic lending and meet tougher regulatoryrequirements on the amount of capital it holds.
Lloyds has said it will ask Britain's financial regulatorfor permission to restart dividends in the second half of theyear, potentially paving the way for a sale of the government'sremaining shares before the next general election in 2015,including an offer to private retail investors.
The bank, whose registered offices are in Edinburgh, mayface questions over whether it will remain in Scotland if voters back independence from the rest of the United Kingdom.
Lloyds has warned it could face significant cost increasesin the event of a "yes" vote and is assessing the potentialimplications of independence for its business and customers.
The meeting will be the first to be chaired by NormanBlackwell, who took over as Lloyds' chairman from Win Bischoffon April 3. Blackwell is a representative of the rulingConservative Party in Britain's upper house of parliament.
($1 = 0.5938 British Pounds) (Editing by Susan Thomas)