RBS announces losses of £1.1bn for 2010

Part-nationalised Royal Bank of Scotland said that it remained in the red last year, but revealed sharply reduced losses of £1.1bn against £3.6bn a year earlier.

The group, which is 83 per cent owned by the Government, said it returned to the black in the final three months of the year, with £12m in profits.

Its improvement came despite a rise in bad debt charges in the fourth quarter as it took a hit in its Ulster Bank subsidiary from the Irish economic woes.

Despite bigger-than-expected losses for 2010, chief executive Stephen Hester said the group was ahead of its original five-year recovery plan.

He added: “The opportunity to sell part of the UK Government’s shareholding becomes increasingly visible and appealing – a ‘win-win’ for the taxpayer and for RBS.

“That moment will be an emblem of our progress and, in some respects, of progress in the wider UK.”

On an underlying basis, it clawed its way out of the red with operating profits of £1.9bn, compared with losses of £6.1bn in 2009.

Its bad debt losses dropped 33 per cent overall in 2010, but it suffered a £1.2bn charge at the end of the year from Ulster Bank.

Because of our taxpayer funding, RBS is gradually recovering from the mess caused by their greedy bankers. Len McCluskey, Unite union

The bank has already revealed its controversial bonus plans, with Mr Hester awarded £2.04m in deferred shares and its investment bankers sharing less than £950m, lower than the £1.3 bn in 2009.

But it revealed today the so-called compensation ratio for investment bankers within Global Banking & Markets – given as a percentage of revenues – rose last year to 34 per cent from 26 per cent despite a fall in revenues at the division.

Mr Hester said the bank had also agreed, as part of the Project Merlin deal with the Government, to lend “at least as much” to small businesses in 2011 as in 2010, with further lending set aside if demand increases.

Union reaction

Len McCluskey, general secretary of the Unite union, said: “Taxpayers will today be baffled as to how it is possible that, while we own 84 per cent of this bank, it continues to so handsomely reward their investment bankers.

“This is an institution in which over 21,000 frontline and support staff have been sacked and RBS still refuse to lend enough to small businesses but bonuses are free-flowing.

“Because of our taxpayer funding, RBS is gradually recovering from the mess caused by their 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.

“It is well overdue that the £20bn public bail-out is acknowledged and the workers who are working tirelessly to ensure this company improves are protected, rather than the risk-taking bankers.”

'There has to be a change in the way the City works - or there'll be another crash' 
Geraint Anderson is a former City worker and writer of City Boy: Fear and Loathing in the City. He told Channel 4 News the system must change. 

"Through clever accounting you can pretend that you've made your bank millions and so rake in massive bonuses despite the fact that you know full well that these toxic loans are bound to explode at a later date because housing bubbles don’t last for ever. You simply don't care. You've fooled the system and are going to get at least four or five huge end of year pay days that mean you can retire as soon as the whole house of cards comes crashing down.

"This, I'm afraid, is exactly what has happened at the beginning of this millennium. The short-term, asymmetrical nature of the investment banks' bonus system means that ruthless, savvy bankers had no qualms about infecting the world with over a trillion dollars of dodgy loans backed up by mortgages that poor Americans simply couldn’t afford. They exploded and created a recession that led to millions losing their jobs but the bankers didn't care because the money kept rolling in before it became clear that the emperor was wearing no clothes.

"That's why there has to be a change in the way the City works and, I'm afraid, as the state-owned RBS hands out almost £1bn in bonuses in doesn't look like there is. Unless the banks' incentive system is made to encourage longer-term thinking and reduce the benefits of short-term, reckless gambling and cheating we will have another banker-based crisis over the next decade … and if that happens then surely this time there will be blood on the streets!"

Read more from Geraint Anderson: 'No one becomes an investment banker to save the world'