Lloyds Banking Group chief executive Antonio Horta-Osorio is in line for a potential shares bonus worth £1.7 million for 2013 and staff will share a £395 million payout.
The taxpayer-backed lender said Mr Horta-Osorio's windfall is deferred for five years and is dependent on performance conditions, while the wider staff bonus pot is 8% higher than the £365 million paid out for 2012.
Details of the bonuses came as Lloyds confirmed it returned to the black in 2013 with bottom line profits of £415 million against losses of £606 million in 2012, and said underlying profits more than doubled to £6.2 billion.
This came despite a soaring bill for mis-selling compensation, which was revealed alongside headline profit figures in a shock update earlier this month.
Mr Horta-Osorio said he will take his bonus for 2013, despite decisions by his counterparts at Barclays and Royal Bank of Scotland to waive their annual payouts.
But the bonus is dependent on the Government selling another 50% of its remaining 33% stake or the share price holding above 73.6p - the average price paid by the Government when the bank was rescued - consecutively for six months.
He defended the decision to increase the overall staff bonus pool in the face of calls for a cut following another £1.8 billion set aside for payment protection insurance (PPI) compensation and the group's record £28 million fine in December over incentive schemes rewarding staff with ''champagne bonuses'' that drove mis-selling.
Lloyds said the potential staff bonus pot had seen a "material" reduction to reflect mis-selling provisions and December's fine, while the group's remuneration committee is also due to discuss clawback of past payouts to individuals relating to the Financial Conduct Authority penalty at the end of last year.
Mr Horta-Osorio added that the bonuses reflect the "excellent progress" made over the last year.
The payout means the majority of staff - around 91,000 employees - will receive payouts averaging £4,500 each, although cash handouts are capped at £2,000 and bonuses are fully deferred for directors.