RBS doubles annual loss in 2011, fourth since bailout

Stephen Hester, chief executive of RBS: "My job is to get good value out of the people at RBS"

The Royal Bank of Scotland has reported its fourth year of losses since the bank's bailout in 2008.

The bank posted an attributable loss of £2bn in 2011, up from a loss of £1.1bn in 2010.

In reaction to the annual results, Chancellor George Osborne said RBS is "cleaning up the mess after the biggest bank bailout in history".

Last month chief executive Stephen Hester turned down his bonus of nearly £1m following political pressure.

On a pre-tax basis, last year's loss was £766m compared with £399m in 2010.

The difference between the attributable loss and the pre-tax loss was down to a tax charge of £1.25bn, which RBS described as "particularly high" and "primarily as a result of continuing Ulster Bank losses".

Last year, the company's share price fell 48% and now stands at under 30 pence. Shares gained 5% on Thursday.

Despite that performance, the bank paid out £785m in bonuses to staff in total last year.

"We all understand that a company that is making losses at the bottom line tests the patience of those who depend on it," Mr Hester said in the results.

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RBS is much less likely to bankrupt all of us than it was, but no one can be confident that it will ever be able to repay us”

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RBS is 82% owned by the state after its £45.5bn bailout in late 2008 at the height of the financial crisis, when it posted the biggest annual loss in UK corporate history.

During 2011, the bank's profitability was boosted in the third quarter by an increase in the value of its debt.

Pay row

For 2011, RBS said its investment bankers will share a bonus pool of £390m.

But the BBC's business editor Robert Peston pointed out that, on average, pay for investment bankers fell 26% to £112,000 per head - which he described as "controversial" because the drop in that division's profitability.

"I understand people's anger and anxiety about inequalities in pay at a time when the economy is weak and many people are finding things tough," Mr Hester said.

"RBS alone cannot fix these wider issues if we are to achieve what is asked of us commercially. But we have led the way in changing how we pay our people."

The chancellor supported the bank's action on pay.

"We have made clear that RBS should be a backmarker in the industry when it comes to pay, so it's right that bonuses at the investment bank are less than half what they were last year and less than a third of what they were in 2009," said Mr Osborne.

But shadow business secretary Chuka Umunna said: "Having gone around lecturing other shareholders to take an active role in ensuring pay restraint in the country's boardrooms and the City, the prime minister has failed to practise what he preaches when it comes to the government's role as principal shareholder in RBS."

Greek debts

RBS reports several figures for profit and loss. Some include one-off charges and other items.

Two big costs contributed to last year's loss.

RBS had to set aside £850m to compensate people who bought payment protection insurance they didn't need.

It also had to take a loss of £1.1bn on its investments on Greek government debt amid the ongoing eurozone debt crisis.

Without those charges and adjustments for bad debt, the so-called core bank, which includes NatWest, made a profit of £6bn - which was down almost 18% on 2010.

RBS has been selling off its "non-core assets" to revive its profitability.

The balance sheet has been reduced by more than £700bn from the peak of the crisis, it said.

"RBS and the economy are linked together. It's safe to say that if the economy recovers this year then RBS will likely make money this year," said Ralph Silva, who runs the consultancy firm, SRN.

"If you look at these numbers and take out the Greek issue and you take out the payment protection they actually broke even and that's a very positive first step."

The bank also said it had given more than 40 pence in every £1 lent to UK small and medium-sized businesses, which is more than was demanded by government targets, and provided 4,000 business loans each week on average.

Mr Hester was appointed chief executive at the end of 2008 to replace Fred Goodwin, who was recently stripped of his knighthood over the collapse of the bank.

RBS' chairman, Sir Philip Hampton, also gave up £1.4m worth of shares he was due next month.

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