RBS losses worse than forecast

24th Feb 2011 06:50

Net losses at taxpayer owned Royal Bank of Scotland (RBS) were twice as bad as expected, and even surpassed the £950m it paid the high fliers at its investment banking arm. Depending on which set of broker forecasts you use, RBS was either expected to post a loss of around £406m or a loss of around £700m after tax and other charges, but whichever way you look at it the attributable loss of £1.13bn was much worse than expected.The underperformance is sure to trigger public anger at the size of the bonuses paid out to its investment banking arm, Global Banking and Markets (GBM), even though these were reduced from £1.3bn in 2009 to £950m in 2010.Cash bonuses at GBM have been capped at £2,000 with the rest made up in share-based payments. GBM revenues, excluding fair value of own debt, were 28% down relative to 2009.The bank's chief executive, Stephen Hester, confirmed he would be trousering the £2.04m bonus he was awarded earlier this month.The bank's results statement led with the good news, as is the way with corporate announcements, pointing to an operating profit of £1,913m, compared with a loss of £6,090m in 2009. That figure was struck after bad debt losses of £9.3bn, an improvement on the £13.9bn hit the bank took the year before, while the group saw an improvement in the fair value of its own debt of £174m, having seen a mark-down of £142m the year before.Group income rose to £32.6bn from £29.6bn in 2009, with good growth in retail & commercial offsetting lower markets-related revenue in global banking.Group income in the fourth quarter of 2010 was 6% lower than in the third quarter, with Core income stable and Non-Core affected by trading results, fair value write-downs and disposals. Group net interest margin for the year improved by a quarter of a percentage point, and was broadly stable in the fourth quarter.The group's Core Tier 1 ratio strengthened by half a percentage point in the final quarter of 2010 to 10.7%, which the bank said left it well placed to meet future capital requirements as stipulated by the Basel banking agreement.There was some light at the end of the tunnel, with the group making a small attributable profit of £12m in the final quarter, despite taking a £1.17bn bath relating to the Core and Non-Core portfolios of its subsidiary, the Ulster Bank.Looking ahead, Hester said: "In 2011 we expect GBM to perform comparably to 2010, with heavy caveats around potential for volatility in results for this business.""We expect further improvements in performance in each of our Retail & Commercial businesses in 2011, although the rate of UK business improvement will flatten given the big improvements achieved in 2010. Ulster Bank performance should improve somewhat in the second half of 2011, although we remain cautious on the economic outlook in Ireland," he added.