£600M bonus pot despite RBS losses
11:16 28 February 2013
PA Wire/Press Association Images
Royal Bank of Scotland fuelled more fury over bonuses as it revealed a £607m haul for workers in spite of recent scandals and another £5.2bn in losses.
The part-nationalised lender has now racked up five years of losses since being bailed out by the taxpayer, but insisted the core bank would return to financial health next year, paving the way for the Government to start offloading its 81pc stake.
Chief executive Stephen Hester - who has already waived his bonus for 2012 - defended its multi-million pound bonus pot, which includes £215 million for investment bankers, saying its staff were “badly needed” to help turn the bank around.
But the group was slammed for handing out hefty bonuses after recent reputational blows, including its £381 million settlement for attempting to rig interbank lending rates, mis-selling scandals and last year’s IT meltdown that left millions of customers without access to their bank accounts.
Mr Hester admitted 2012 had been a “chastening year”.
He said: “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.”
On plans to cap bonuses revealed in Brussels last night, he said “income restrictions have not been encouraging in the past”.
Trade union Unite said RBS bosses “turned a blind eye to price fixing and mis-selling”.
Dominic Hook, Unite national officer, added: “Instead of setting an example to the world and supporting a cultural shift in the banking industry, Stephen Hester refuses to back the EU cap.
“As the head of Britain’s biggest bank he should be showing more leadership and drive change.”
Last year’s losses widened markedly from £1.2 billion in 2011 after its £381 million settlement for Libor rate fixing, while the bank revealed another £1.1 billion in provisions to cover mis-selling claims and £175 million for the IT fiasco.
It increased cash put by for the mis-selling of interest rate swap products to small businesses by £650 million, on top of £50 million already set aside.
RBS also revealed a fourth quarter increase of £450 million to cover claims relating to the mis-selling of payment protection insurance (PPI), taking its total for PPI to £2.2 billion.
It said it had recouped £302 million for its Libor settlement by cutting the 2012 bonus pot from £789 million last year, clawing back long-term incentive payouts from previous years and reducing current year awards.
Bottom-line figures were also skewed by a £4.6 billion accounting charge for changes in the value of its own debt.
On an underlying basis, group operating profits rose from £1.8 billion in 2011 to £3.5 billion in 2012, thanks to a 68% rise in earnings at its investment banking arm.
Mr Hester said the core bank was “much closer now to being in the good financial health that would allow shareholders to receive a dividend and the Government to start to sell its stake”.
He insisted this would be the last year under a “wrenching” restructuring, which will also see it look to increase its focus on the UK further by floating part of its American bank Citizens in around two years.
It was a move welcomed by Chancellor George Osborne, who has been putting pressure on the bank to concentrate on the UK and rein in its overseas ambitions.
He said: “The Government’s strategy is for RBS to be a stronger and safer bank, which in time can be returned to full private ownership.
“I have been very clear that I want to see RBS as a British-based bank, focused on serving British businesses and consumers, with a smaller international investment bank to support that activity rather than to rival it.
“I welcome RBS’s announcement today to accelerate that strategy.”
RBS revealed that a flotation was also looking most likely for the 315 branches it must sell to appease European rules on state aid, although the group is having to ask the European Commission for an extension on the deadline for sale.
It said buyers remain “thin on the ground” following the collapse of its deal with Santander.
RBS - which is 81% owned by the state after a £45.5 billion bailout in 2008 - is looking at kick-starting the flotation process by selling a minority stake to private equity and institutional investors, with aims to create a separate bank under the Williams & Glyn’s brand.
Mr Hester said there would be further job losses in its markets division this year as it continues to shrink the investment banking business, but declined to reveal numbers.
RBS recently confirmed investment banking boss John Hourican would leave the group following the Libor scandal, forfeiting around £9 million in bonuses and long-term incentive shares.