RBS to unveil £2b loss and £400m bonus pot for 2011

The Royal Bank of Scotland (RBS) will unveil its financial results for 2011 tomorrow and is expected to reveal a loss of around £2 billion.

Despite this, RBS is expected to announce that it will pay out £400 million in bonuses to staff. This is slightly below the figure quoted in the last few weeks of £500 million.

RBS has been in discussions with the government over the suitable level of bonuses it can pay out and Sky News reports that the figure will be £390 - £400 million. The bonus pot is around 60 per cent less than last year. Most of the larger individual bonuses will be paid in shares and deferred over three years.

The losses have been caused by a variety of factors most notably a £1 billion provision for payment protection insurance (PPI) compensation and exposure of RBS’s investment bank to the euro debt crisis.

The decision on bonuses will provoke anger amongst the public and many politicians across the political spectrum. Earlier this month RBS’s chief executive, Stephen Hester was forced to waive his share bonus, valued at £963,000 based on the share price at the time, due to political pressure and public anger. RBS Group Chairman Sir Philip Hampton waives his £1.4 million bonus ahead of being pressurized to do so.

RBS is 83 per cent owned by the UK taxpayer after requiring a £45 billion bailout during the financial crisis in 2008. Its share price fell slightly today ahead of the results announcement and now sits at 27.3 pence, less than half the price paid for the taxpayers share by the government of 65 pence.

There is anger that bonuses are being paid to staff from a majority public-owned bank that has not made profits for four years and is no closer seemingly to repaying the public purse.

RBS argue that it needs to be run as a competitive business in order to overhaul the bank and return it to profit, improve the share price and, eventually repay the taxpayer. The bank has made thousands of employees redundant and sold many parts of the business as it looks to reposition itself and move away from the risky area of investment or “casino” banking.

Stephen Hester has been instrumental in the attempts to restructure the bank and the government wants him to stay in his post and complete the job.

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