RBS says it is making 'good progress' in plans to turn around bailed-out bank

Royal Bank of Scotland said it is making good progress on asset sales and signalled it will raise targets on its executive bonus scheme to mute investor complaints.

Part-nationalised RBS, bailed out at the height of the crisis and now 83 per cent owned by the UK taxpayer, kicked off its annual shareholder meeting against an improving backdrop, and its shares have recovered to the point where taxpayers could make a profit.

But Philip Hampton, RBS chairman, said much work needs to be done before RBS can leave behind its image of a "problem bank".

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"We are under no illusions that we are out of the woods," Mr Hampton said. RBS was "on its knees" a year ago, but has made a good start in its turnaround plan, he said.

He said RBS was making "good progress" on its disposals programme, including the sale of payment processing arm WorldPay and 318 bank branches, although the sale or flotation of its insurance arm "looks unlikely before 2012."

A year ago, RBS shareholders voted overwhelmingly against the bank's remuneration report, venting their anger and frustration over the bank's troubles and former boss Fred Goodwin's pension.

The focus now has shifted to the possible impact of the outcome of the May 6 General Election on plans to sell down the state's stake in RBS, especially with a UK election just a week away. Taxpayers who bailed out the bank are benefiting from strong investment banking profits.

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RBS shares closed down 1.8 per cent, at 54.95p, after a fall across Europe's bank sector amid worries about exposure to weak economies in southern Europe, but still above the average price of around 50p at which the Government bought its stake.

RBS is expected to field tough questions on pay for its board and, more broadly, its top bankers. Mr Hampton repeated that the bank needs to "strike a balance" between the Gvernment's demand to rein in pay and the need to retain staff.

RBS has been a lightning rod for public outrage over bankers' pay and has held extensive talks with shareholders over remuneration and its new long-term incentive plan (LTIP) for executives and senior managers. Reports this week have said the bank will scrap a trigger point of 50p a share for the LTIP, after shareholders said it should be higher.

That trigger is part of an absolute shareholder return measure which accounts for one quarter of the award.

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PIRC, a leading UK governance body which advises major institutional investors, said last week shareholders should reject pay proposals from both RBS and rival Lloyds as they lacked disclosure.

Investors are also expected to quiz the bank on whether it plans to sue beleaguered investment bank Goldman Sachs over losses linked to a deal currently being probed.

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