Shares in Lloyds Banking (LLOY) rise by nearly 10% after the market welcomes a 200% dividend hike and news that it has reined in staff bonuses.

The stock advances 9.8% to 68.3p on plans by the bank to pay 2.25p a share for 2015, up from the 0.75p it recommended when reintroducing shareholder returns in 2014 after a six year hiatus.

Lloyds also announces a 0.5p a share special dividend.

The extra shareholder reward is being made despite a 7% fall in pre-tax profit to £1.6 billion, which would have been much higher if not for a £2.1 billion additional payment protection insurance (PPI) mis-selling charge bringing its total bill for the year to £4 billion.

The bank has paid £16 billion in product mis-selling compensation to date, so news of an October 2018 deadline for making such claims is welcomed by investors.

The market also welcomed a cut in bonuses, albeit a slight reduction. Lloyds will pay £353.7 million to staff on top of their salaries, down from £369.5 million in 2014.

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Shares have slumped some 14% since the start of 2016 when they opened at 73p a share. This has led the government to postpone the sale of at least £2 billion worth of shares to retail investors that was planned for the spring.

The government currently owns less than 10% of the stock and plans to exit the business by the end of 2016.

Royal Bank of Scotland (RBS) enjoys a knock-on effect as shares gain 4% to 241.5p ahead of its full-year results on Friday 26 February.

Issue Date: 25 Feb 2016