British bank RBS losses balloon to $ 9.05 bn

LONDON: Britain’s bailed-out Royal Bank of Scotland yesterday posted its fifth straight annual loss for 2012, when it was hit by a string of scandals, but added that its boss would still take a deferred bonus.
Losses after tax ballooned to 5.97 billion pounds ($ 9.05 billion, 6.89 billion euros) last year, compared with a shortfall of 1.997 billion pounds in 2011, RBS revealed in a results statement.
The lender was hit hard last year by mis-selling compensation payouts, LIBOR rate-rigging fines and a vast accounting charge.
The Edinburgh-based bank yesterday said it had set aside another 450 million pounds to cover compensation for mis-selling payment protection insurance, and 650 million pounds for clients mis-sold interest rate hedging products.
The bank also took a huge accounting charge of 4.65 billion pounds against the improving value of the group’s own debt. That contrasted with a credit of 1.91 billion pounds in 2011.
RBS had already revealed earlier this month that it would pay fines totaling $ 612 million (453 million euros) to US and British regulators to settle allegations of LIBOR interest rate-rigging.
Despite the scandal-tainted year, chief executive Stephen Hester revealed he would still pick up the second tranche of his deferred bonus for 2010 next week.
When asked if he would be taking 780,000 pounds in RBS shares in March, Hester told the BBC: “Yes, I am. Other people decided to award it to me. As you know it’s the only bonus in four years I have taken. “By the standards of other people doing this job that is something that the board clearly felt was merited.”
RBS also paid bonuses to other staff, despite public outcry after it became the third bank to admit its part in the LIBOR affair after Barclays and UBS.
The lender did however cut its bonus pool to 607 million pounds, from 789 million pounds in 2011, after recouping cash to pay its recent fines to settle allegations of LIBOR rate-rigging.
Bonuses at taxpayer-rescued lenders have long been a flashpoint for public outrage in Britain, with the economy on the cusp of its third recession since the 2008 global financial crisis that was rooted in the banking sector.
The government still owns 81 percent of RBS after it was bailed out at the height of the crisis with 45.5 billion pounds of taxpayers’ cash, making it the world’s biggest banking bailout.
Across in Brussels, the European Union has agreed to new rules that would cap bankers’ bonuses, blamed by critics for helping to drive the global financial crisis but also defended as crucial for the smooth working of the banking system.
The European Parliament and the EU’s current Irish presidency yesterday agreed how to implement Basel III, an internationally-agreed set of regulations which tighten capital requirements in the hope of preventing any repeat of the 2008 banking collapse.
Back in London, RBS added that its underlying operating profit excluding exceptional charges almost doubled to 3.462 billion pounds last year, aided by deep cost-cutting and falling impairment charges.
And the group noted that its five-year restructuring plan would be mostly complete by the end of 2013, predicting it would therefore become a “cleaner” and better performing bank next year.
“RBS is four years into its recovery plan and good progress has been made. We are a much smaller, more focused and stronger bank. Our target is for 2013 to be the last big year of restructuring,” said Hester in the earnings release.
He added: “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.
“We are determined to overcome the cultural and reputational baggage of pre-crisis times with the same focus we have applied to the financial clean-up from that era.”
RBS also outlined plans to float part of its US arm Citizens and retreat further from investment banking to boost capital levels and prepare for its eventual return to the private sector.
“I think we are coming really closer to the point where we are a normal company again,” Hester told the BBC Radio Scotland.
“I hope we can be a really good company in due course and when privatization is an option available to the government.”
Royal Bank of Scotland was ravaged by its badly-timed consortium takeover of Dutch bank ABN Amro at the top of the market in 2007, just before the global financial crisis struck.