Andy Hornby, chief executive of HBOS, banked a pay and benefits package worth £1.75m last year, the bank's annual report revealed yesterday.

The former chief operating officer occupied the top job for just five months of the period, after taking over from Sir James Crosby on August 1.

Hornby's 2006 remuneration included a cash performance bonus of £606,000, but in this respect at least he was put in the shade by Peter Cummings, chief executive of Bank of Scotland Corporate. Cummings' salary of £547,000 was swollen by a performance bonus of £825,000, which took his total package including other benefits to £1.5m.

Total boardroom pay at HBOS increased in 2006 to £10.3m, up from £8m in the previous 12 months. Crosby banked £1.2m in his valedictory year.

The total was also increased by the promotion of Jo Dawson, formerly group risk director, to chief executive of the insurance and investment division from March 1. Dawson pocketed £514,000 for the year, including a bonus of £211,000.

Benny Higgins, spirited away from Royal Bank of Scotland by HBOS to head the retail banking division, was recruited on a basic salary of £625,000 but with the potential to earn £2.75m in a full year. He received £1.1m in 2006 after joining HBOS on May 1, including a bonus of £435,000. Higgins' package includes sums to compensate him for benefits he would have got had he remained with Royal Bank.

Last month HBOS reported a 19% rise in profit before tax to £5.7bn. Underlying profits in corporate rose 17%, and in insurance and investment by 19%. The international, and treasury and asset management divisions, both recorded profit increases of more than a third.

Britain's biggest mortgage lender reported a more modest 4% rise in underlying profits in its retail arm, to £2.36bn. Margins were adversely affected by the bank's determination to lift its share in the mortgage market and increased competition in the buy-to-let market.

In 2007, HBOS is proposing to greatly enhance its incentive arrangements for the 215 most senior staff on the basis of its competitors' alleged largesse. This follows its discovery that many competitors have made hefty incentive-based payments "for relatively average performance", it said.

This elite will be eligible for a 200% return on their investment in the bank's "sharekicker" free shares scheme, subject to earnings per share growth, up from 50% at present. For executive directors, meanwhile, conditional share grants are to be increased from 100% of salary to 133.3% of salary under an existing long-term incentive plan.