RBS Boss: Spring Cleaning Drives £5.16bn Loss

The Royal Bank of Scotland boss has said "spring-cleaning" continues after his firm reported a pre-tax loss in 2012 of £5.16bn.

RBS chief executive Stephen Hester said: "This company is going through a pretty thorough spring-cleaning. It is a pretty dusty job.

"We are spring-cleaning this house and it is looking shinier."

But the markets reacted swiftly and by close of trading shares on the FTSE 100 were down 6.6%, at 323p.

The share price of RBS is at a fraction of its pre-crisis level

The bank's £5bn-plus loss was in part due to provisions RBS has made for customer redress for payment protection insurance (PPI) mis-selling and other so-called bad practices.

It said the annual return was impacted heavily by a £4.64bn "accounting charge for improved own credit" as bond repurchase value on cash market credit spreads rose 340 basis points.

However, the firm's bankers will still share a bonus pool of £607m - including £215m for investment bankers.

In 2011 the total bonus pot was around 25% higher, at £789m.

When asked to justify the £607m payout, Mr Hester said: "We are a very big company so the numbers end up being substantial, but they are much smaller than other banks.

RBS has lost £2.02bn through Ulster Bank since January 2011

"We believe that we are doing a responsible job on bonus restraint while acknowledging our staff are badly needed."

The bonus reduction was done to help recoup cash to pay for its recent Libor-rigging settlement with UK and US authorities.

Last month RBS reached an agreement with the Financial Services Authority and US authorities over Libor and other rate fixings to include penalties of £381m.

Ulster Bank, which was hit by massive IT woes similar to NatWest last year, made a loss of £1.04bn in 2012.

RBS saw reduced income in its UK retail arm, its UK corporate division, international banking and at Ulster, while income for private wealth and US arms remained flat.

The disgraced ex-boss Fred Goodwin reigned over the previous RBS regime

Mr Hester admitted 2012 had been a "chastening" year to "put right past mistakes", with losses up significantly from £1.2bn in 2011.

The company revealed it took a £450m charge in the last three months of 2012 over PPI mis-selling, taking its cumulative provision to £2.2bn.

By December 31 a total of £1.3bn had been paid out in redress over the scandal.

The bank said: "Our target is for 2013 to be the last big year of restructuring. There will be important work still to do, but an increasingly sound base from which to work.

"As the spotlight shifts to the 'new RBS' post restructuring, we are determined that it will show a leading UK bank striving to be a really good bank."

RBS saw changed fortunes in its core business, with retail and commercial sector income down 6% but markets up 68%.

Both RBS and NatWest were hit by IT failures last summer

The bank added: "RBS is four years into its recovery plan and good progress has been made. We are a much smaller, more focused and stronger bank.

"By serving customers well RBS can become one of the most respected, valued and stable of banks. That is our goal."

In its annual report the bank, which was bailed-out in Britain's biggest ever corporate disaster, said there is an intention to float an estimated 25% of its stake in US banking arm Citizens.

This move was welcomed by Chancellor George Osborne who said: "The Government's strategy is for RBS to be a stronger and safer bank, which in time can be returned to full private ownership.

"I have been very clear that I want to see RBS as a British-based bank, focused on serving British businesses and consumers, with a smaller international investment bank to support that activity rather than to rival it."

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