Lloyds Banking Group is set to stoke further controversy over bonuses tomorrow amid reports it will announce a rise in staff payouts and shares windfall worth more than £1.5 million for boss Antonio Horta-Osorio.

The taxpayer-backed bank is expected to say its staff bonus pot has risen close to £400 million for 2013, up from £365 million for 2012, alongside full-year results showing a return to bottom line profits.

Under a deal agreed with UK Financial Investments - the government body charged with managing taxpayer stakes in banks - it is thought that Mr Horta-Osorio will only receive his bonus if the share price remains above 73.6p for six months or half of the remaining 33% taxpayer stake in the bank is sold off.

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It comes just days after fellow high street banking giant Barclays defied calls for restraint on pay after hiking its staff bonus pool by 10% to £2.4 billion despite a 32% drop in underlying annual profits to £5.2 billion.

Lloyds recently said it expects to make a small statutory profit for last year and to better City expectations with an underlying profit of £6.2 billion for 2013.

This compares with bottom line losses of £570 million in 2012 and £2.6 million profits on an underlying basis.

But the early release of its figures was made alongside a shock update revealing an extra £1.8 billion in payment protection insurance (PPI) provisions, taking its total bill so far to nearly £10 billion.

The group has also made a further provision of £130 million relating to the sale of interest rate hedging products to small and medium-sized businesses, bringing the total amount set aside to £530 million.

Mr Horta-Osorio has faced pressure to follow the lead of his counterparts at Barclays and Royal Bank of Scotland and waive his annual bonus entitlement after the soaring PPI bill emerged and in light of the lender's record £28 million fine in December over incentive schemes rewarding staff with ''champagne bonuses'' that drove mis-selling.

Martin Wheatley, head of the Financial Conduct Authority, agreed with MPs in a recent Commons committee hearing that the Lloyds bonus pool should be cut as a result of the recent fine against the group.

Mr Horta-Osorio may be hoping to avoid a backlash against his bonus after the Government sold off a 6% stake to institutional investors last year - raising £3.2 billion.

And Lloyds said earlier this month that plans were in place for a further sale of government shares, which could see members of the public snap up stock later in the year.

Mr Horta-Osorio landed a bonus worth more than £2 million for 2012, which was similarly linked to shares remaining above 73.6p - the average price paid by the Government when the bank was rescued.

Shares have held firm above this level for some months, although they were hit recently when the City was left disappointed after Lloyds said it would apply later this year to resume dividend payments at a "modest'' level.

Some analysts had been expecting dividends to be reinstated earlier and by more than its guidance implied.