Millionaire payouts for bank's top staff after £3bn annual loss

ROYAL Bank of Scotland is to pay more than 100 of its top investment bankers a £1m bonus, fuelling the row over bonuses at a time when the part-nationalised bank made an annual loss of £3.6bn.

The millionaire payouts form part of a 1.3bn bonus pool for the bank's top rollers, while other staff will share a 400m reward.

In the House of Commons yesterday, politicians from all sides condemned the payouts.

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Tory Shadow Chancellor George Osborne said bankers' pay had reached ridiculous levels. "We have just got to look at the whole banking sector and try to bring this pay down," he added.

Liberal Democrat treasury spokesman Vince Cable said: "RBS rewarding individual bankers is like a football team paying their striker for scoring when they've just been relegated."

But RBS chief executive Stephen Hester hit back, saying the bank was walking a tightrope between public outrage and business demands.

He estimated the group had already lost around 1bn in profits after top-performing staff left the bank last year in order to move to better paid jobs.

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"The number of top-ranked people who left us doubled last year," he said. "Attracting and retaining people is the most important job I have to get the taxpayer back their money. The loss of people is damaging but it's not yet destructive."

Most of the high earners are based in London and New York. The bank's tellers and other frontline staff will get a maximum of 2,000 each.

The big bonuses will be paid in stock rather than shares although some shares can be cashed in as early as June. The most highly paid have, however, agreed to hold their shares for at least five years.

The bonus pool is worth an average 77,000 for the 16,800 investment bank staff. The average base salary is roughly the same amount.

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RBS's bonus payouts as a percentage of revenue is below all its major rivals.

The bank, which is 84 per cent owned by the state, said it is trying to balance external political and public pressure to clamp down on payouts with the need to pay competitive rates.

"We understand the anger around that," said RBS chairman Philip Hampton.

But Welsh Secretary Peter Hain said bankers were now more unpopular than MPs and called on them to justify to the public their "very large bonuses".

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Despite the criticism, , the body set up to manage the Government's stakes in banks, UK Financial Investments has given its blessing to the bonus payments.

The 3.6bn loss was better than expected and RBS shares closed up 6.2 per cent last night, a rise of 2.25p to 38.38p.

Last year the group made a record 24.3bn loss – the largest in UK corporate history – as the bank paid the price of its former disastrous mistakes.

Mr Hester said the intense levels of scrutiny over the issue of remuneration were "crosses we have to bear".

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The RBS boss, who waived his own bonus for 2009, said he had done so to try to take the heat out of the bonus issue.

The only cash bonuses will be paid to those earning under 39,000, who will get a maximum of 2,000 in cash.

RBS said it expects to make a 208m contribution to the Treasury bonus tax.

A spokesman for the Treasury said RBS is "leading the world in pay restraint among banks".

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"The Government supports Stephen Hester and the staff at RBS in their work to rebuild the bank, and deliver more lending to UK businesses and households," he said.

"Because of the Government's role as an active shareholder, they will pay no cash bonuses, defer their bonuses over up to five years, and pay the lowest remuneration ratio of any investment bank."

RBS said the better-than-expected loss was driven by an improved performance from the investment banking division in the past three months .

The group's core business – the activities that will stay part of the organisation after the restructuring plans – saw profits rise from 4.4bn in 2008 to 8.3bn last year. This was mainly due to the investment arm swinging to a profit of 5.7bn from a 1.8bn loss in 2008.

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The UK retail division, which includes the NatWest brand, saw operating profits of 229m in the year, 494m lower than in 2008, as the deteriorating economy saw loan impairments rise by 660m. RBS said there were signs that conditions had started to stabilise.

Insurance Arm flotation plan

RBS is hoping to float its insurance business, which employs nearly 4,000 people in Yorkshire, in the second half of 2012.

The group has to sell the business, which includes the Direct Line, Churchill, Green Flag and Privilege brands, in order to satisfy EU rules on state aid.

RBS said it expected 2010 would be a "bounce back year" for the division, which employs 3,000 in Pudsey and Leeds, 700 in Doncaster, 150 in Wakefield and 60 in Sheffield.

RBS believes a separate listing of the business is the most likely outcome but it may consider a trade sale.