• £607m paid out in bonuses, £215m to investment bankers
• £450m extra charge from PPI scandal
• Plans to spin off part of US arm Citizens
Royal Bank of Scotland's losses have widened. Photograph: David Cheskin/PA
Royal Bank of Scotland
declared on Thursday it was on track for a partial privatisation next
year but sparked a fresh row over bonuses at the scandal-hit
institution.
The bank posted an annual loss of more than £5bn and Stephen Hester, its chief executive, admitted 2012 had been a "chastening" year after its £390m Libor rigging fine. Its total losses since the 2008 bailout have now topped £34bn. However, the bank is still paying out £607m in bonuses in the coming weeks.
The shares were among the biggest fallers on the stock market, losing more than 6% to 323p – which amounts to a near £15bn loss on the taxpayer's 82% stake.
Hester, however, said "the light at the end of the tunnel" toward privatisation was "coming much closer" while Sir Philip Hampton, RBS's chairman, hoped the bank would start to pay a "token" dividendto shareholders – the first since the banking crisis – "as soon as possible". He said: "Our objective is to give the government options to sell its stake as soon as possible and it would be very good if we could make that 'as soon as possible' 2014."
A government spokesman insisted that "there is no timetable for a disposal" although ideas for a free distribution of shares to 46m voters had been floated as recently as a fortnight ago.
George Osborne claimed credit for the decision by RBS to "accelerate" its focus on UK retail and corporate banking. It announced further streamlining of the investment bank and a plan to spin off part of its US operation, known as Citizens, in two years. Hester described UK Financial Investments, which looks after the stakes in the bailed-out banks, as becoming "more activist in trying to present its views".
Asked what form any share sale would take, Hampton said he expected taxpayers to be able to "participate in the availability of shares" although he warned about the number of football stadiums that would be needed for shareholder meetings.
Hester said the privatisation of RBS would be a "seminal" moment, appearing to indicate that he intended to stay on to see the task through.
Despite the loss, RBS has paid out £607m in bonuses, £215m of which went to its investment bankers whose division was behind the Libor scandal. The bank, which said bonuses would have been £500m higher without the Libor fine, risked inflaming the row over City pay further by indicating that its annual report in March could disclose how many of its staff take home more than £1m.
Labour Treasury spokesman Chris Leslie said: "We need radical change in the culture of our banks and that must include reining in bloated bonuses, which are a device for keeping traders focused on the weeks ahead, rather than years ahead."
Ian Gordon, analyst at Investec, said that RBS was "starting 2013 in a weaker financial position than the market had anticipated". The bank insisted it would meet international targets for capital before the deadline in 2019.
Hester stressed that the bank's assets had been reduced by £906bn since their peak in 2008 but acknowledged the cost of the payment protection insurance scandal, for which the bank took a further £450m charge to take the total cost to £2.2bn, and the interest rate swap mis-selling scandal had required a further £650m charge. The computer meltdown in June cost £175m.
He said: "2012 saw landmark achievements for RBS. It was also a chastening year. Along with the rest of the banking industry we faced significant reputational challenges as we worked with regulators to put right past mistakes."
Osborne, who this week rejected calls for RBS to be fully nationalised, said: "I have been very clear that I want to see RBS as a British-based bank, focused on serving British businesses and consumers, with a smaller international investment bank to support that activity rather than to rival it."
The chancellor added: "The government's strategy is for RBS be a stronger and safer bank, which in time can be returned to full private ownership." But he did not give any clues as to his preferred route for when a share sell-off can begin.
Hester acknowledged the influence of the government and also the regulators which have been conducting a review of bank capital. There had been an "important accommodation" over the bank's capital, Hester said.
"The two revisions to our strategy that go with that are a further shrinkage of our markets business, with the capital there coming down significantly further over the next couple of years" and the intention to start selling Citizens.
On bonuses, Hester said that while the figure looked a "big number", it was below the £1.8bn being paid out at Barclays and sums handed out by rivals UBS and Deutsche Bank.
RBS was forced to sell off its insurance business Direct Line by Brussels in return for the taxpayer bailout in 2008 and spun off a third of the operation last year, for which it has already been forced to take a goodwill writedown of £394m.
• This story was amended on Thursday 28 February to correct the figures for the amount being paid in bonuses
The bank posted an annual loss of more than £5bn and Stephen Hester, its chief executive, admitted 2012 had been a "chastening" year after its £390m Libor rigging fine. Its total losses since the 2008 bailout have now topped £34bn. However, the bank is still paying out £607m in bonuses in the coming weeks.
The shares were among the biggest fallers on the stock market, losing more than 6% to 323p – which amounts to a near £15bn loss on the taxpayer's 82% stake.
Hester, however, said "the light at the end of the tunnel" toward privatisation was "coming much closer" while Sir Philip Hampton, RBS's chairman, hoped the bank would start to pay a "token" dividendto shareholders – the first since the banking crisis – "as soon as possible". He said: "Our objective is to give the government options to sell its stake as soon as possible and it would be very good if we could make that 'as soon as possible' 2014."
A government spokesman insisted that "there is no timetable for a disposal" although ideas for a free distribution of shares to 46m voters had been floated as recently as a fortnight ago.
George Osborne claimed credit for the decision by RBS to "accelerate" its focus on UK retail and corporate banking. It announced further streamlining of the investment bank and a plan to spin off part of its US operation, known as Citizens, in two years. Hester described UK Financial Investments, which looks after the stakes in the bailed-out banks, as becoming "more activist in trying to present its views".
Asked what form any share sale would take, Hampton said he expected taxpayers to be able to "participate in the availability of shares" although he warned about the number of football stadiums that would be needed for shareholder meetings.
Hester said the privatisation of RBS would be a "seminal" moment, appearing to indicate that he intended to stay on to see the task through.
Despite the loss, RBS has paid out £607m in bonuses, £215m of which went to its investment bankers whose division was behind the Libor scandal. The bank, which said bonuses would have been £500m higher without the Libor fine, risked inflaming the row over City pay further by indicating that its annual report in March could disclose how many of its staff take home more than £1m.
Labour Treasury spokesman Chris Leslie said: "We need radical change in the culture of our banks and that must include reining in bloated bonuses, which are a device for keeping traders focused on the weeks ahead, rather than years ahead."
Ian Gordon, analyst at Investec, said that RBS was "starting 2013 in a weaker financial position than the market had anticipated". The bank insisted it would meet international targets for capital before the deadline in 2019.
Hester stressed that the bank's assets had been reduced by £906bn since their peak in 2008 but acknowledged the cost of the payment protection insurance scandal, for which the bank took a further £450m charge to take the total cost to £2.2bn, and the interest rate swap mis-selling scandal had required a further £650m charge. The computer meltdown in June cost £175m.
He said: "2012 saw landmark achievements for RBS. It was also a chastening year. Along with the rest of the banking industry we faced significant reputational challenges as we worked with regulators to put right past mistakes."
Osborne, who this week rejected calls for RBS to be fully nationalised, said: "I have been very clear that I want to see RBS as a British-based bank, focused on serving British businesses and consumers, with a smaller international investment bank to support that activity rather than to rival it."
The chancellor added: "The government's strategy is for RBS be a stronger and safer bank, which in time can be returned to full private ownership." But he did not give any clues as to his preferred route for when a share sell-off can begin.
Hester acknowledged the influence of the government and also the regulators which have been conducting a review of bank capital. There had been an "important accommodation" over the bank's capital, Hester said.
"The two revisions to our strategy that go with that are a further shrinkage of our markets business, with the capital there coming down significantly further over the next couple of years" and the intention to start selling Citizens.
On bonuses, Hester said that while the figure looked a "big number", it was below the £1.8bn being paid out at Barclays and sums handed out by rivals UBS and Deutsche Bank.
RBS was forced to sell off its insurance business Direct Line by Brussels in return for the taxpayer bailout in 2008 and spun off a third of the operation last year, for which it has already been forced to take a goodwill writedown of £394m.
• This story was amended on Thursday 28 February to correct the figures for the amount being paid in bonuses
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