The Royal Bank of Scotland – a majority tax-payer owned bank, has reported a net loss of £1.13 billion for 2010, a sharp recovery from £3.16 billion it recorded in 2009. Recovery is ahead of schedule, the bank said although loan impairments for the fourth quarter were reported higher than the previous one.
Provisions for bad loans for the year were down by 33% over the previous year to £9.3 billion. A strong performance by its retail and commercial units and a faster than expected divestment of non-core assets helped the bank cut losses significantly.
The bank reported a profit of £1.1 billion at an operating level, compared to a loss of £6.1 billion reported a year ago. At operating level, costs incurred for the governments Asset Protection Scheme and restructuring cost effects are stripped out. The Asset Protection Scheme – an insurance cover against losses from bad loans had cost the bank an exceptional net £1.1 billion for the year.
The bank’s North Ireland Ulster Bank subsidiary had been facing growing problems, it disclosed.
The bank made a small profit of £12 million in Q4, 2010 compared to a loss of £765 million in the final quarter of 2009.
In the 11 months between March 2010 and February 2011, it advanced loans of £52 billion to businesses, ‘well ahead’ of its target of £50 billion for the year, the bank said.
The loans to mortgage customers nearly doubled to £15 billion for the year compared to an annual target of £8 billion.
Performance for 2010 was a “step change in our financial performance”, the bank said.
Commending the bank’s performance, Chairman Philip Hampton said: “The return to operating profit reflects both the internal rebuilding process at RBS and the external recovery in market and economic conditions.
“We are still a good way from where we want to be in terms of our performance but 2010 represents another big stride towards that goal”.
Revenue from the investment bank division dropped by 28 percent due to lower trading activities, but was offset by the strong performance of retail business unit.
Stephen Hester – chief executive will take home a bonus of £2 million, all in shares, although his salary remains frozen at £1.2 million per annum.
Mr. Hester emphasized the fact that the bank is only into the second year of its five years turnaround plan.
““We are still cautious about the work that needs to be done. The outside world has many uncertainties”, he said.