Royal Bank of Scotland makes £1.1bn loss – and pays out £950m in bonuses

[wolverine]

Bailed out Royal Bank of Scotland reported losses of £1.1bn for 2010 – but still plans to pay out bonuses of £950m to its bankers.

The figure is an improvement on the loss of £3.6bn a year ago and the record breaking £24bn loss in 2008, when it was rescued by the taxpayer. Even so the shares fell more than 3% to 45.8p in early trading as the losses were still larger than market had been expecting.

RBS returned to the black in the final quarter even though it was hit by a £1.1bn charge for its Irish banking unit, Ulster. Total impairments in Ulster increased to £3.8bn for the year, while total impairement losses were down 33% at £9.2bn.

Stephen Hester, who was parachuted in as chief executive in October 2008, confirmed that he intended to accept the £2.04m bonus that was announced earlier this month as part of the Project Merlin deal with the government. The bonus is to be placed in a so-called "share bank" and deferred for three years. The bonus pool for RBS's investment banking arm – known as RBS Global Banking and Markets – was set at £950m in 2010, down on the £1.3bn in 2009, and cash bonuses were capped at £2,000.

Despite this reduction in the bonus pool, the proportion of revenue the bank uses to pay its investment banking staff rose to 34% from 26% a year ago, although the bank insisted that pay had fallen by £200m in the division. Average pay fell to £144,000 in 2010 from £162,000 in 2009.

Len McCluskey, the general secretary of Unite, said: "Taxpayers will today be baffled as to how it is possible that while we own 84% of this bank it continues to so handsomely reward its investment bankers. This is an institution in which over 21,000 front-line and support staff have been sacked, RBS still refuses to lend enough to small businesses and bonuses are free flowing.

"Because of our taxpayer funding RBS is gradually recovering from the mess caused by its greedy bankers. Yet the chancellor continues to tolerate the award of some £950m in bonuses to the culprits, instead of ensuring our taxes do not become worthless."

Stephen Hester declared that "RBS's recovery is ahead of schedule" and stepped up plans to sell off items in the bank's troubled non-core division by an extra £20bn.

He also admitted that he was not able to hire staff as easily as he hoped because the bank has often become a "political football".

"Our ability to attract, retain and motivate the best people is still not what we want it to be. Our business challenges and the external environment lead to management compromises that add risk to the achievement of our business goals. We are working hard to move forward and balance staff motivation with external acceptance that past mistakes have been addressed," he said.

He played down any expectations that the taxpayer might be able reduce stake in the bank imminently, despite the intervention from Qatar, which on Wednesday said it was interested in buying stakes in both the bailed out banks, RBS and Lloyds. The bank share price is currently below the average of just over 50p at which the taxpayer invested £45bn; Hester noted that any share sale would not take place before September when the independent banking commission, chaired by Sir John Vickers, is scheduled to report. The decision to sell any shares would be taken by the government. "I don't think it's imminent," he said.

The commission could force banks such as RBS to split up along their investment banking and retail banking arm and Hester warned about its potential impact. "There are traps to avoid in areas where UK reform, which is not followed elsewhere, might bring more cost than benefit, hamper banks and the economy and give the illusion of more safety without its reality. The commission's work is continuing thoughtfully and we are co-operating fully to give insights wherever helpful".

The bank intends to pull out of the asset protection scheme (APS), which insures its most toxic assets, as planned in 2012. The insurance scheme - which dents the banks potential profits as it is accounted for a credit derivative - hit profits by £1.1bn in 2010.

Ian Gordon, banks analyst at Exane BNP Paribas, said this APS charge was largely why the £1.1bn loss was "technically a 60% miss against both our forecasts and consensus".

Finance director Bruce van Saun admitted that the bank would again not pay corporation tax in 2011 as it has deferred tax assets of £6.3bn that it can use up before paying any tax, £3.8bn of which relates to the UK.

Even so, the bank said it paid £3.9bn to the UK government in 2010. The bulk is payroll taxes of £1.5bn and a further £1.5bn in fees, including £700m for the APS.

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[man for the society]

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[wolverine]

[quote author=Man For The Society link=topic=159453.msg1902768#msg1902768 date=1298548139]
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[/quote]
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[krldr871]

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[satti pandu]

[quote author=Leader871 link=topic=159453.msg1902778#msg1902778 date=1298548312]
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