Guardian News

RBS losses hit £2bn amid bonus row

© Press Association 2011

7:38am Thursday 23rd February 2012

Taxpayer-backed Royal Bank of Scotland remained at the heart of the row over bankers' pay as it unveiled total losses of £2 billion for 2011 at the same time as paying £785 million in bonuses to its staff.

RBS, which is 82% state-owned after receiving a £45.5 billion bailout at the height of the financial crisis, said the bonus pool included £390 million for its 17,000 investment bankers.

While the total pot is 43% lower than the previous year, it follows a period in which the bank announced thousands of job cuts as it scales back its investment arm Global Banking and Markets.

It also follows a turbulent period for the bank in which chief executive Stephen Hester was forced to waive his £963,000 all-shares bonus amid public outrage over bankers' pay.

The bank, which employs 146,800 staff, revealed wider total losses of £2 billion in 2011, compared with £1.1 billion in 2010, which included a near £1 billion hit for mis-sold payment protection insurance compensation (PPI).

Unite said it had confronted RBS for failing to offer its workforce a fair pay deal, adding that talks have broken down. "If RBS split the massive bonus pot it is awarding its investment bankers between the 60,000 average bank workers, they would have a real opportunity to pay their household bills and change the life of their family," said the union. "The bonus pot would give these low-paid employees approximately £6,000, which amounts to simply loose change for a City slicker."

Chancellor George Osborne said: "We have made clear that RBS should be a back-marker in the industry when it comes to pay, so it's right that bonuses at the investment bank are less than half what they were last year and less than a third of what they were in 2009. But our main interest should be to get back as much money as possible for taxpayers and we must not let those that want to create an anti-business culture put that at risk."

RBS said the average bonus per group employee was £5,346, whereas the average bonus per investment banker was £22,941. Total staff costs, including salary, were down 9%.

The bank said it had exceeded its so-called Merlin lending targets, including to small business, agreed between the top five banks and the Government last year. RBS said it handed out £93.5 billion of new lending to UK businesses in 2011, up 22% on the previous year, which included £40.9 billion to SMEs, a 4% increase on 2010. RBS added that it lent almost as much to SMEs last year as all of its competitors put together. The bank has made moves to force down its bad debts, which were cut by 20% in 2011 to £7.4 billion.

Shadow business secretary Chuka Umunna said: "Having gone around lecturing other shareholders to take an active role in ensuring pay restraint in the country's boardrooms and the City, the Prime Minister has failed to practise what he preaches when it comes to the Government's role as principal shareholder in RBS. By failing to act, David Cameron has shown just how out of touch he is with investor groups like the Association of British Insurers and business leaders like Sir Mike Darrington, who have said there needs to be change and reform. Now even one of his own senior backbenchers is saying he has failed to crack down on 'crony capitalism'."

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