Royal Bank of Scotland slashes annual losses to £1.125bn

LONDON: Britain's state-rescued Royal Bank of Scotland said Thursday that losses narrowed sharply last year to £1.125 billion pounds as bad debts tumbled, and insisted it has turned the corner in its recovery.

The shortfall, equivalent to 1.327 billion euros or $1.823 billion, was a large improvement from net losses of £3.607 billion that were suffered in 2009, said RBS, which is 83-percent owned by the taxpayer after a huge bailout.

Most of last year's loss was due to a large exceptional charge of £1.116 billion under the government's asset protection scheme, which is an insurance plan to protect banks from losses generated by high-risk assets.

Operating profit, excluding any exceptional elements, jumped into a profit of £1.913 billion in 2010, compared with a shortfall of £6.090 billion in the previous year.

Bad debt losses meanwhile dived 33 percent to £9.256 billion, but the group faced a £1.2 billion charge in the fourth quarter from Ulster Bank.

"It's clear that, two years into our recovery plan, RBS has turned a corner," Chief Executive Stephen Hester told BBC Radio after publication of the results.

"We have moved to £2 billion of operating profits from £6 billion of loss.

"At the bottom line, we are still loss-making, but that is because of the money that we are paying back to the government through the asset protection scheme."

The partly-nationalised company added that in the fourth quarter, or three months to December, it made a slender net profit of £12 million. That compared with a third-quarter net loss of £1.146 billion.

The Edinburgh-based lender was ravaged by the global credit crunch and the takeover of Dutch giant ABN Amro at the top of the market in 2007.

That led to RBS being rescued with 45 billion pounds of British government money -- the biggest single bank bailout in the world.

Hester meanwhile added that the company would be "happy" for the state to sell its stake, should the opportunity arise.

"We have a huge stewardship of the 45 billion pounds of taxpayer investment ... and we would be very happy, when the opportuntity arises, if the government decides to sell its shares," he told the BBC.

"We think that will be a win-win for RBS and for the country.

"RBS was an emblem of the financial crisis. The ability to sell our shares, and for the taxpayer to realise its investment, will be an emblem of recovery."

The lender had already announced earlier this month that it would limit banking staff pay as part of a wide-ranging deal with the government.

Hester was awarded a 2010 bonus of £2.04 million in deferred shares, while its investment bankers will share a pot of £950 million -- down from £1.3 billion the previous year.

"I came into RBS two years ago .. in order to rescue the company for the benefit of all," Hester said.

"I was hired to have the recovery of RBS become a reality. I need good colleagues feeling fairly treated to do that.

"If people feel unfairly treated, then that is reflected in whether they want to worked for you and how they work for you," he said, adding that those responsible for major mistakes had already left the company.