By Simon Miller
RBS saw a £2bn loss in 2011 after hits from Payment Protection Insurance (PPI) mis-selling claims and a write down of Greek debt.
On a pre-tax basis, last year's loss was £766m compared with £399m in 2010 although RBS’s profitability was lifted by an increase in the value of its debt during the third quarter.
RBS set aside £850m to compensate customers who were mis-sold PPI and took a £1.1bn loss on its investment in Greek government debt.
The bank’s core divisions reported operating profits of £6.1bn, down around 18% from £7.4bn in 2010 and its funded balance sheet decreased by £49bn to £977bn.
The bank’s capital ratio remained ‘robust’ according to RBS with a Core Tier 1 ratio of 10.6% and loan-to-deposit ratio in the Core bank improved to 94% compared to 96% in 2010.
Impairment losses totalled £7.43bn, down 20% from 2010 and provision coverage of risk elements in lending increased to 49% from 47%. Market risk was reduced significantly, with average trading value-at-risk down 37% from 2010.
Group loan-to-deposit ratio improved by 10 percentage points to 108% while non-Core funded asset reduction exceeded targets, falling to £94bn - under 10% of Group total assets.
Chief executive Stephen Hester commented: “We have three jobs at RBS: to support our customers; to defuse our legacy risks; and to rebuild a successful profitable bank. In 2011 we showed results across all three goals, though with much still to do.”
He added that support for customers remained key to the business: “We provided service to more than 30m customers worldwide. In UK lending support specifically, we provided £94bn gross lending to corporates (£41bn to SMEs) exceeding our targets and far exceeding any competitor bank.”
With bonuses to the fore in public anger, RBS revealed that bonuses had fallen by 42% in its investment banking arm, with the total bonus pool shrinking to £785m, and £390m.
In his letter to shareholders, group chairman Philip Hampton wrote: “It is the Board's view that running the business on commercial grounds is the best way to make the bank safer and more valuable for everyone who depends upon it. I do not believe there is a workable alternative if our aim is to provide the opportunity for the UK government to sell its shares in the public markets in a reasonable timescale.”
He added: “I understand people's anger and anxiety about inequalities in pay at a time when the economy is weak and many people are finding things tough. RBS alone cannot fix these wider issues if we are to achieve what is asked of us commercially.”