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R.B.S. Reports Loss on Exposure to Greek Debt
February 23, 2012
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By JULIA WERDIGIER

LONDON — Royal Bank of Scotland, majority-owned by the British government after a bailout, reported a bigger-than-expected loss for 2011 on Thursday, partly because of its exposure to Greek government bonds.

The loss widened to £2 billion ($3.2 billion) last year from £1.1 billion a year earlier as R.B.S. took large write-downs on the value of its Greek bond holdings and had to compensate some customers who were wrongly sold insurance. The bank also posted a loss of £1.8 billion in the fourth quarter of 2011 compared with a profit of £12 million in the period a year earlier.

Stephen Hester, the chief executive, said the bank was making progress toward its goal of becoming “a successful profitable bank” but “with much still to do.”

Mr. Hester embarked on a turnaround plan in 2009 that reduced the bank’s riskier assets, cut thousands of jobs and scaled back its investment banking operation by closing some business units. He is also seeking to reduce R.B.S.’s reliance on funding from the financial markets and government loans.

But the bank is still struggling to reduce risk on its books, which together with the costly takeover of the Dutch bank ABN Amro at the peak of the market led to the government bailout. Mr. Hester said previously that repairing R.B.S. was like defusing “the biggest time bomb in history.”

R.B.S., in which the government holds a stake of more than 80 percent, said its investment banking bonuses were 58 percent lower for 2011 than they were a year earlier, and bonuses at the entire banking group were 43 percent lower.

The investment banking bonus pool was £390 million for last year, or about £23,000 per employee. That was a sharp drop from a £937 million bonus pool a year earlier.

“I understand people’s anger and anxiety about inequalities in pay at a time when the economy is weak and many people are finding things tough,” said Philip Hampton, the bank chairman. “R.B.S. alone cannot fix these wider issues if we are to achieve what is asked of us commercially. But we have led the way in changing how we pay our people.”

Mr. Hester and Mr. Hampton gave up their bonuses this year after intense pressure from some politicians and the public.

R.B.S. said it had to reduce the value of its Greek sovereign debt holdings by £1.1 billion and set aside £950 million for compensating some customers, to whom it wrongly sold a type of mortgage payment insurance.
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