Royal Jock looses £3.6bn but plans to pay £1.3bn bonuses

[David Guyatt]

Blimey!

http://news.bbc.co.uk/1/hi/business/8534694.stm

RBS reports £3.6bn loss for 2009
Royal Bank of Scotland (RBS) has announced losses for 2009 of £3.6bn ($5.5bn), after struggling with billions of pounds of bad loans.

Despite the losses, the bank is set to announce it will pay bonuses totalling £1.3bn to its staff.

But the bank's head, Stephen Hester, said it had lost money by not paying big bonuses to retain productive staff.

The UK taxpayer owns 84% of RBS after the government bailed out the bank at the end of 2008.

'Experiment'

Chief executive Mr Hester told BBC Radio 4's Today programme: "We've had a small experiment in this respect... some of our best-performing people have been leaving in their thousands.

"The people who left us last year, I believe, would have increased our profits by up to £1bn beyond the ones that we've got."

Mr Hester has decided not to take his own bonus, which would have been £1.6m.

RBS's £3.6bn loss is lower than the £5bn many experts were expecting and is well below the £24bn it lost in 2008.

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However, the level of bad debts rose sharply to just short of £13.9bn, up from £7.4bn in 2008, although the bank says it thinks these have now peaked.

Torrid time

Mr Hester said he expected the bank to return to profit next year.

The banks have been through a torrid time since the credit crunch struck in 2007, an event sparked by the banks' own unwillingness to lend to each other after the major lending spree they had been on started to turn bad.

Added to that was RBS's unique heavy burden - its takeover of the Dutch bank ABN Amro in late summer 2007 just as the banking boom was about to turn to bust.

It paid £49bn for the business, only to make a writedown of £17bn a year later, largely due to that ABN Amro deal.

RBS is the second major UK bank to report 2009 results, after Barclays announced profits of £11.6bn last week. Lloyds Bank, which is also partly state-owned, will report its results on Friday.

Under fire

Aside from bonuses, one other controversial topic for the banks has been their role in lending to business and home buyers.

RBS said that it was satisfied it was fulfilling both the letter and the spirit of its lending commitments, which were to make an additional £9bn available to the mortgage market and £16bn to businesses.

It said it had beaten its mortgage target, but had fallen short of its business lending target as many companies had been concentrating on reducing their debts and the recession meant that demand for loans had been weak.

RBS has shrunk massively in size over the year. In 2008 its assets stood at £2.1tn.

It has been running down a vast portion of its business - mainly bad loans - and its assets are now worth £1.5tn.

A bank spokeswoman said that was the equivalent of shedding an organisation the same size as the profitable US financial institution, Goldman Sachs.

[David Guyatt]

http://news.bbc.co.uk/1/hi/business/8536155.stm

Bankers still overpaid, boss says



The chairman of US bank Morgan Stanley, John Mack, has said that bankers are still paying themselves too much.

"I still don't think the industry gets it," Mr Mack said.

Banks are reforming pay by focusing too much on structure - such as deferring bonuses to later - rather than the huge amounts being paid out, he said.

Earlier this week, the New York state Comptroller said that Wall Street banks may have paid more than $55bn in bonuses last year.

"If we don't do something, the government will do something" on pay, Mr Mack said.

The issue of bonuses has become a huge political issue on both sides of the Atlantic as many of the banks that are paying bonuses to staff made losses during 2009 and were bailed out by taxpayers.

On Thursday, Royal Bank of Scotland - which is 84%-owned by the UK government - said that it made a loss of £3.6bn ($5.5bn) in 2009, but will pay £1.3bn in bonuses to staff.

Mr Mack - speaking at Queens University in North Carolina - cited the example of a trader that recently left Morgan Stanley.

The 28-year-old trader's unit had earned as much as $400m for the bank.

Morgan Stanley had offered to pay him $11m, but the trader left to join a hedge fund that paid him $25m, Mr Mack said, according to Bloomberg News.

Morgan Stanley reported record losses in 2008 and survived the financial crisis because of government aid.

Mr Mack recently stepped down as chief executive but remained chairman.

He has not taken a bonus for the past three years.