TAXPAYER-backed Royal Bank of Scotland remained at the heart of the row over bankers’ pay today as it unveiled total losses of £2 billion for 2011 at the same time as paying £785 million in bonuses to its staff.
RBS, which is 82% state-owned after receiving a £45.5 billion bailout at the height of the financial crisis, said the bonus pool included £390 million for its 17,000 investment bankers.
While the total pot is 43% lower than the previous year, it follows a period in which the bank announced thousands of job cuts as it scales back its investment arm Global Banking and Markets.
It also follows a turbulent period for the bank in which chief executive Stephen Hester was forced to waive his £963,000 all-shares bonus amid public outrage over bankers’ pay.
The bank, which employs 146,800 staff, revealed wider total losses of £2 billion in 2011, compared with £1.1 billion in 2010, which included a near £1 billion hit for mis-sold payment protection insurance compensation.
Unite said it had confronted RBS for failing to offer its workforce a fair pay deal, adding that talks have broken down.
“If RBS split the massive bonus pot it is awarding its investment bankers between the 60,000 average bank workers, they would have a real opportunity to pay their household bills and change the life of their family,” said the union.
“The bonus pot would give these low-paid employees approximately £6,000, which amounts to simply loose change for a City slicker.”
David Fleming, Unite national officer, said: “It beggars belief that this 84% taxpayer-backed institution is imposing a pay cut on its hard-working frontline staff, while continuing to pay the City bankers ridiculously large bonuses.
“This hypocrisy will infuriate the workforce, who have continued to work under the hardest of conditions. Instead of walking away from pay talks, RBS should be reconsidering its derisory pay offer.
“Unite is now asking its members whether they can accept the deal and are seeking members’ views on the proposal.
“How does RBS expect staff to accept its claims of poverty and this ludicrous pay offer when there is clearly enough money flowing into the hands of its top bankers and traders?”
Chancellor George Osborne said: “We have made clear that RBS should be a back-marker in the industry when it comes to pay, so it’s right that bonuses at the investment bank are less than half what they were last year and less than a third of what they were in 2009.
“But our main interest should be to get back as much money as possible for taxpayers and we must not let those that want to create an anti-business culture put that at risk.”
RBS said the average bonus per group employee was £5,346, whereas the average bonus per investment banker was £22,941. Total staff costs, including salary, were down 9%.
Discussing the furore surrounding pay at RBS and the wider industry, Mr Hester said the criticism levelled at the bank hinders its progress.
He said: “No one should be under any illusions. You can’t have your cake and eat it. The noise around RBS is very damaging.”
On waiving his own bonus, he said: “I got myself into an unfortunate position where it would have been more damaging for me to take it.”
RBS said it had exceeded its so-called Merlin lending targets, including to small business, agreed between the top five banks and the Government last year.
This may come as a surprise after official figures revealed the banks missed the target for gross lending to small and medium enterprises (SMEs), with many assuming RBS was the culprit behind the shortfall.
But the bank said it handed out £93.5 billion of new lending to UK businesses in 2011, up 22% on the previous year, which included £40.9 billion to SMEs, a 4% increase on 2010.
RBS added that it lent almost as much to SMEs last year as all of its competitors put together.
RBS has moved to strip down its investment arm GBM, which employs 18,500 worldwide, amid increased Government pressure to focus its operations on UK high street services.
The restructuring will lead to around 3,500 job losses, on top of the 2,000 announced by the bank last summer.
The bank said its wider losses were partly driven by higher restructuring costs, as well as the PPI hit and a £1.1 billion loss on the value of Greek debt. In addition, its struggling Irish bank Ulster saw bad debts rise to £1.3 billion.
The bank has made moves to force down its bad debts, which were cut by 20% in 2011 to £7.4 billion.
The wider total losses at the bank are also likely to raise questions over how long it will take for taxpayers to get a decent return on their stake.
While shares have risen nearly 40% since the start of the year, adding around £8 billion of market value, and therefore £6.5 billion to the taxpayers’ investment, the value is still far from the 50p needed to break even.
In his opening comments, chairman Philip Hampton said: “A sign that we have succeeded will be the desire of private investors to acquire the UK Government’s stake.
“While these investors hold only 18% of our shares today, their view of our performance, leadership and strategy is crucial. All being well, they will own the majority of the equity capital of the company in future years.”
Shares in the bank rose 3% after today’s results to around 28.3p.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “If the current RBS executive did indeed inherit ‘the biggest time bomb in history’, they are continuing carefully to choose which wires to cut.”
Shadow business secretary Chuka Umunna said: “Having gone around lecturing other shareholders to take an active role in ensuring pay restraint in the country’s boardrooms and the City, the Prime Minister has failed to practise what he preaches when it comes to the Government’s role as principal shareholder in RBS.
“By failing to act, David Cameron has shown just how out of touch he is with investor groups like the Association of British Insurers and business leaders like Sir Mike Darrington, who have said there needs to be change and reform.
“Now even one of his own senior backbenchers is saying he has failed to crack down on ‘crony capitalism’.”
Deputy Prime Minister Nick Clegg, on a visit to GKN Aerospace in Gloucestershire, was asked if bonuses were justified in a loss-making bank.
He said: “Bonuses are principally for the one bit of RBS which is still making profits, which is the investment bit of it.
“Crucially those bonuses are well, well, well below what they were. They are less than a third of the amount of bonuses that they got just two years ago under Labour in 2009 and if you look at the bigger picture, bonuses are down, the taxes the banks are paying to you and I, to the taxpayer, are up because we have imposed a new £10 billion bank levy and crucially we are reforming the banking system in this country on a scale that is simply unprecedented.
“Nowhere else in the world will you see the radicalism of our plans to basically split up the banking system so that high street banks are insulated from high risk investment banking.
“Yes, I understand people’s frustration, yes I understand that many people are saying that not a single penny of bonuses should be paid.
“I think we are in a very crucial stage in a longer journey moving away from the boom and bust period of irresponsibility and the bonus culture that went out of control.
“We have seen today much lower bonuses and I hope that will be part of a longer transformation of our banking system.”