RBS posts losses of £3.6bn... but will still hand staff bonuses of £1.3bn

Published 25th Feb 2010

The taxpayer-owned Royal Bank of Scotland today posted losses of £3.6bn - just hours after announcing it would hand staff bonuses of £1.3bn.

The bonus payout was given the green light by UK Financial Investments (UKFI), the body set up to manage the taxpayers' stakes in banks.

The decision means that 18,000 investment bankers at RBS - which is 84 per cent taxpayer-owned after a string of bailouts - will be paid a massive £73,000 each - three times the national average salary.

The decision to allow the bonus payments to go through will prompt outrage from the public.

City analysts had expected the bank to post losses of more than £5bn.

Chief executive Stephen Hester said the results had 'exceeded all the principal milestones' set for the first year of its turnaround plan.

The announcement came after Gordon Brown yesterday declared that the bailed-out banks would be forced to 'pay back every penny that is owed to the British public.'

The payout to investment bankers was given the green light by UK Financial Investments (UKFI), the body set up to manage the Government's stakes in banks.

Mr Hester, who has waived his own payout for last year, had previously said the bank would pay 'the minimum we can get away with'.

Shadow chancellor George Osborne said 'people will find it very difficult to understand' how RBS could pay out bonuses in the current circumstances.

'We have just got to look at the whole banking sector and try to bring this pay down. It has got to ridiculous levels,' he told BBC Breakfast.

Mr Osborne did not deny that a Conservative government would also have given the green light to the RBS bonuses but added: 'I welcome there are no cash bonuses.'

He said RBS should not be singled out and he recognised the bank's argument that important staff would leave if pay was not competitive.

Mr Osborne said 'unacceptable' pay levels throughout the sector must be tackled.

Mr Hester added today that the group's core business - the activities that will stay part of the organisation after the restructuring plans - saw profits rise from £4.4 billion in 2008 to £8.3 billion last year.

Bad debt and other impairment charges across the group increased to £13.9 billion from £7.7 billion the previous year.

The bank said there were signs that its level of soured loans could have reached its peak, with the fourth quarter looking less dire for corporate clients.

However it warned the financial circumstances of many consumers and businesses remain fragile and that current economic uncertainty 'could expose some customers to further difficulty'.

The bank said it is in discussion with the Government about altering its lending commitments to 'reflect the economic circumstances' over the next year.

It stressed it was 'unambiguously open for business' in its lending to customers, but the strained economic environment had caused many customers to become 'nervous about financial matters' and reduce their borrowings.

As part of its bailout terms, the firm agreed to make an extra £25 billion available to customers in loans - £9 billion for mortgages and £16 billion for business lending.

The firm said its was on course to surpass its commitment to lend to householders, with net mortgage lending over the year at £11.8 billion.

Lending to firms was £60.2 billion in 2009, but after loan repayments and overdraft movements saw business lending balances down 8 per cent by the year end.

Mr Hester said 2009 was 'a year of substantial progress' for the bank.

'RBS is being restructured and run to serve customers well, to be safe and stable and to restore sustainable shareholder value for all,' he said.

'That is our legal duty and it is our intention and desire. It is also the only way taxpayers will recover the support they have given us.'

Source: ' Daily Mail '

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