Finance: Rescued bank to raise pay despite £1.4bn loss

RBS, which is 83 per cent owned by the taxpayer, slumped back into the red in the July-to-September period with losses of 1.4bn, after accounting charges skewed results and amid lower investment banking returns.

But in a move likely to stoke further anger over pay in state-backed players, RBS revealed it increased its compensation ratio – staff costs as a percentage of revenues – to 40 per cent for its Global Banking and Markets (GBM) team.

This was higher than the 32 per cent in the previous quarter and the 35 per cent a year earlier.

The news comes in a week of increasing pressure on bailed out banks after Lloyds Banking Group revealed a mammoth pay deal for its new chief executive and nationalised Northern Rock said it would pay outgoing head Gary Hoffman nearly 500,000 while on gardening leave.

RBS said underlying figures showed earnings of 726m in the three months to September 30, up from 250m in the second quarter as it continued to benefit from lower bad debts.

Chief executive Stephen Hester said the figures showed "steady progress" with its recovery plan, with statutory results hit by highly volatile accounting charges.

It had returned to profit in the first half, but this was also flattered by accounting technicalities.

Fellow banking giant HSBC also updated on third quarter trading today, saying that profits remained "well ahead of 2009" despite slowing growth and lower revenues.

HSBC's update echoed those of its US and UK competitors.