RBS recovery 'ahead of schedule'


Royal Bank of Scotland has revealed sharply reduced losses of 1.1 billion pounds

Part-nationalised Royal Bank of Scotland has said its recovery is ahead of schedule after it slashed annual losses by more than half in 2010.

RBS, which is 83% owned by the taxpayer, posted losses of £1.1 billion in 2010 against a £3.6 billion loss in 2009.

The bank’s improvement came as it clawed its way out of the red in the final three months of the year, with £12 million in profits, thanks to sharply lower losses on loans turned sour.

Stephen Hester, chief executive of RBS, said: “Two years on from the global financial crisis, RBS’s recovery is ahead of schedule.”

He added the group was aiming to make further headway this year during its five-year turnaround programme. “We have much work still to do and there are significant obstacles still to overcome,” he said.

On an underlying basis, it clawed its way out of the red with operating profits of £1.9 billion, compared with losses of £6.1 billion in 2009.

RBS revealed the so-called compensation ratio for investment bankers – given as a percentage of revenues – rose last year to 34% from 26%. But it said this rose as it took on more staff and saw revenues in GBM fall after a unusually strong year in 2009.

Pay per head dropped in the division and Mr Hester said while the group had a duty to the taxpayer to keep staff costs down, it was a “handicap” for the firm.

The bank also agreed with the Government to lend “at least as much” to small businesses in 2011 as in 2010, with further lending set aside if demand increases. It is on track for gross lending of £30 billion to small businesses in the current year to the end of February.

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: “In all, RBS is clearly making progress from its former woes, but remains a group in the grip of transition. Even though the strategy has been laid out and is being slowly followed, less patient investors will look for more immediate prospects elsewhere in the sector.”

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