The bank increased its bonus pool from £395m, up from £65m in 2012, after reporting its first profit since the financial crisis.
The bank said it had achieved a pre-tax profit of £405m, its first since the government bailout in 2008.
Horta-Osorio told the BBC: “I strongly believe you should link compensation with performance, and having increased our underlying profits by 140%, we thought it was appropriate to increase the bonus pool of the bank by 8%.
“I have also agreed to have additional conditions to my bonus… which is fully paid in shares, which aligns my interests with the interests of the taxpayer, so if the strategy we are pursuing proves itself wrong, that money can be clawed back.”
The bank put aside another £3.5bn last year to cover for the mis-selling of Payment Protection Insurance, taking the total to £9.8bn.
It has also been reported Lloyds could look to claw back bonuses paid to former executives, including previous CEO Eric Daniels, to cover for PPI mis-selling.
