Royal Bank of Scotland loss narrows as bad loans fall

Royal Bank of Scotland, the UK bank which is 84pc owned by the Government, reported a narrower loss in 2010 as provisions for bad loans fell. 

 

Chief executive Stephen Hester said the Government is unlikely to start selling its RBS stake until the Independent Commission on Banking's report is complete. 

Edinburgh-based RBS reported a net attributable loss of £1.1bn for last year, down from £3.6bn in 2009. The pre-tax loss was £239m.

Stephen Hester, chief executive, also put the loss for the year down to a £1.55bn charge paid to the Governement's Asset Protection Scheme, set up at the height of the financial crisis, which RBS aims to exit by 2012.

Mr Hester said the Government was unlikely to start selling its stake in RBS until after the Independent Commission on Banking finishes its report into the sector, due by the end of September this year.

"RBS was an emblem of the financial crisis and it will be an emblem of recovery" when the Government sells its stake, Mr Hester said in a BBC radio interview.

"Its something we'll be working on this year, and hope that will provide opportunities for the Government in due course."

Mr Hester also admitted the bank is used a "political football", and said: "It can feel pretty beleaguered working at RBS."

The shares were down 2.5pc to 46.16p in early trading. RBS's shares peaked at 602.6p each in March 2007, falling as low as 10p in January 2009.

"RBS is clearly making progress from its former woes but remains a group in the grip of transition," said Richard Hunter, head of UK equities at stockbrokers Hargreaves Lansdown. "Even though the strategy has been laid out and is being slowly followed, less patient investors will look for more immediate prospects elsewhere in the sector."

The bailed-out bank also confirmed that, as expected, Mr Hester will take his £2m bonus for last year and that its investment bankers will take home around £950m in bonuses. That is £200m less than in 2009.

The compensation ratio across the bank fell to 17pc from 31pc last year, although in the investment banking arm the ratio increased to 34pc from 26pc last year, because revenues fell by £3.15bn. 

One buyer for parts of the Government's stake in RBS could be the Gulf state of Qatar, after discussions with David Cameron, the Prime Minister.

RBS said it made an operating profit of £1.9bn in 2010, recovering from a £6.1bn loss the previous year, and returned to profit by all measures in the fourth quarter.

However the £1.1bn loss was worse than analysts were expecting - consensus forecasts compiled by Bloomberg were for a £406.5m loss.

That was due to losses on loans in Ireland, which almost doubled to £1.16bn last year. The Ulster Bank division lost £761m.

Overall, RBS's impairment charges on bad loans fell to £9.3bn during the year, down from £13.9bn in 2009. 

"2010 was a year of good progress and the group is on or ahead of its published goals for this stage of our plan," Mr Hester said.

RBS is in the second year of a five-year recovery plan, after being bailed-out by the Government in 2008.