RBS, 82% taxpayer-owned, announced a pre-tax loss of £766m for 2011. That's worse than the previous year, when it made losses of £239m. Net loss was £2bn, compared to £1.1bn in 2010. Nevertheless, the markets recated positively to RBS' financial results, with the bank's stock rising by 5% this morning.
Like Barclays, which reported a profit-fall of 3% for 2011 earlier this month, RBS blamed the eurozone debt crisis, weak consumer confidence and tighter regulation. Banks have been forced to ring-fence their retail branches from investment banking, decreasing the risk of another financial meltdown; but banks argue it has made their borrowing more expensive.
There will be a salary freeze for 10,000 of RBS's highest earners. Nevertheless, bonuses remain a high priority. RBS gave away £390m in bonuses to its investment bankers last year. It’s a 60% cut on the year before and the lowest amount since 2008, when it was bailed out by the UK taxpayers. But as the bank has announced thousands of job losses over the last year, and has left the taxpayer with a heavy loss, its sure to keep the heat over bankers' pay simmering.
RBS has been restructuring the business for the past year as it tries to stem the heavy losses which started from the banking crisis in 2008. Last month, RBS announced 3,500 job cuts in its investment arm GBM, following the 2,000 cuts announced in August 2011. In total, around 30,000 employees have lost their jobs at RBS over the last two years - more than 20,000 of those in the UK. But chief executive Stephen Hester told the BBC this morning that turning the bank around is a five-year job, and maintains that the restructuring is ahead of schedule.
RBS has been at the centre of heated debates over bankers’ pay in recent weeks, which led to Stephen Hester turning down his near-£1m bonus after pressure from politicians and the public. Chairman Philip Hampton also waived his £1.4m bonus in stocks. No doubt fearing more political interference, Hampton this morning called on RBS to be run on more commercial grounds.
When the government rescued RBS in 2008, taxpayers paid just under 50p a share. Totalling £45.5bn, it was the costliest bailout of any bank in the world. This morning shares were trading at around 28.5p – meaning the bank has lost half its value and is worth around £26bn. But the share price had increased by 5% on the day before, suggesting investors are confident the bank is on track to return to growth.
Lloyds is also expected to report a loss when its financial results for 2011 are revealed tomorrow. Like RBS, the taxpayer also has a stake in the business (41%), so expect the bonus pool to again be scrutinised.