• Loss an improvement on £3.6bn last year and £24bn in 2008
• Bailed-out bank increases part of revenue paid to bankers
• Unite ‘baffled’ by handsome rewards
More than 100 bankers at Royal Bank of Scotland were paid more than £1m last year and total bonus payouts reached nearly £1bn – even though the bailed-out bank reported losses of £1.1bn for 2010.
The chairman, Sir Philip Hampton, said the number of millionaires was lower than a year ago and said a quarter of the group’s 18,700 investment bankers would not receive a bonus from the £950m payout pool agreed with UK Financial Investments, which controls the taxpayer’s 83% stake in the bank. Unions were baffled that any bankers were getting bonuses.
The 2010 figure is an improvement on the loss of £3.6bn a year ago and the record-breaking £24bn loss in 2008. Even so, the shares were down 3.6% to 45.7p as the losses were bigger than expected and profits in the investment bank fell to £3.4bn from £5.7bn a year ago.
Staff will be informed of their bonuses on Friday and to stop the biggest names from quitting, the bank has axed payouts to lower performers. Bonuses are capped at £2,000 in cash but in June bankers will be able to sell some of the bonds in which the bulk of their bonuses are paid.
Lord Oakeshott, the Liberal Democrat peer who resigned from the party’s front bench this month in protest at the lenient treatment banks were receiving from the coalition government, said delaying cash payments until June was no hardship. “There’s not much restraint needed before they decide if it is a new Aston for Ascot or a Ferrari for Wimbledon,” he said.
RBS was back in the black in the final quarter even though it was hit by a £1.1bn charge for its Irish unit, Ulster Bank. Total bad debt provisions for Ulster increased to £3.8bn for the year – more than a third of the bank’s total impairments of £9.2bn. Analysts warned it could be 2014 before the Irish arm returned to profit.
The UK high-street business was the big star, as profits soared from £229m to £1.4bn. Bad debt charges fell and more mortgage customers left fixed rates and moved to the far more profitable standard variable rate.
The core business posted operating profits of £7.4bn, which were eaten into by £5.5bn of losses in the non-core division, to reduce overall operating profit to £2bn – better than the £6bn loss in 2009.
The insurance arm – which must be sold to appease EU regulators – made a £265m loss after the bad weather pushed fourth-quarter claims £100m higher than usual.
Stephen Hester, who was parachuted in as chief executive in October 2008, said he would accept the £2.04m bonus that was announced earlier this month . Hampton said he deserved the payout because he was working like “stink”.
He said hiring staff was difficult because the bank was a “political football”.
“It’s a tough thing for us,” he said. “It can feel pretty beleaguered working at RBS with external and internal pressures, that’s one of the handicaps we work with.”
Despite a reduction in the bonus pool from £1.3bn a year ago, the proportion of revenue used to pay investment bankers rose to 34% from 26% a year ago, although average pay fell to £144,000 in 2010 from £162,000.
Len McCluskey, the general secretary of Unite, said: “Taxpayers will 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.”
Hester played down expectations that the government stake could be sold soon, despite interest from Qatar in buying stakes in both the bailed-out banks, RBS and Lloyds.
The RBS share price is now below the average of just over 50p at which the taxpayer invested £45bn and Hester believes a sale is unlikely before September when the Independent Commission on Banking, chaired by Sir John Vickers, will report. Hester warned that Vickers could have an impact on the share price. For every 1p rise in the share price, the value of the taxpayer’s stake increases by £900m.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 hit profits by £1.1bn in 2010.
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.
Thursday 24 February 2011 19.18 GMT
Source: The Guardian