Royal Bank of Scotland’s shares plummeted on Thursday after it announced losses last year of 8.2 billion pounds (9.98 billion euros) due to restructuring costs and fines for misconduct.
New chief executive Ross McEwan warned there would be more losses as it repositions itself away from investment banking and more towards a lender for British individuals and businesses.
McEwan, who is seeking to shake off RBS’s reputation as Britain’s pariah bank, said: “We are the least trusted company in the least trusted sector of the economy. That must change.”
There was political anger that, despite the losses, RBS paid out 576 pounds (701 billion euros) in bonuses.
RBS has become, as one UK parliamentarian put it this week, “the unacceptable face of British banking”. While the government sits on a paper loss of around 16 billion pounds (19.5 billion euros), it has continued to pay bumper bonuses.
Deputy Prime Minister Nick Clegg said in a television interview: “A loss-making bank that is basically on a life-support system because of the generosity of British taxpayers shouldn’t be dishing out ever larger amounts of money in pay and bonuses.”
McEwan, who has waived his bonus for last year, defended the payouts, which had been agreed with UK Financial Investments, the agency that manages the government’s stake.
“We need to be pragmatic. I need to pay these people fairly in the market place to do the job,” he said.
After being bailed out with taxpayer money RBS is more than 80 percent owned by the government and is years away from privatisation.
“We need to recognise that we are not yet a strong enough bank that can be privatised at a profit for the taxpayer in the immediate future,” McEwan said.
“There is no point avoiding this inconvenient truth.”