RBS reports total losses of £2 billion in 2011, compared with £1.1 billion in 2010, which included a pre-tax loss of £766 million after charges for PPI and Greece.
Stephen Hester, Group Chief Executive, commented:
“We have three jobs at RBS: to support our customers; to defuse our legacy risks; and to rebuild a successful profitable bank. In 2011 we showed results across all three goals, though with much still to do.”
‘Core’ divisions reported operating profits of £6.1bn, down from £7.4bn last year, reflecting the challenging environment for RBS’s wholesale divisions.
For the Group as a whole, and after the effect of several large one off items such as PPI compensation costs, Greek sovereign debt impairments, and integration and restructuring costs, the Group reported a pre-tax loss of £766m.
Against a tough external environment, 2011 saw good progress on risk reduction, capital, funding and liquidity metrics.
- Capital ratio remained robust, with Core Tier 1 ratio of 10.6%.
- Loan-to-deposit ratio in the Core bank improved to 94% compared to 96% in 2010.
- Group loan-to-deposit ratio improved by 10 percentage points to 108%.
- Balance sheet size showed good progress, with funded balance sheet decreasing by £49bn to £977bn.
- Non-Core funded asset reduction exceeded targets, falling to £94bn - under 10% of Group total assets.
Support for customers also remained a central goal.
Stephen Hester said:
“We provided service to more than 30 million customers worldwide. In UK lending support specifically, we provided £94 billion gross lending to corporates (£41 billion to SMEs) exceeding our targets and far exceeding any competitor bank.”
Lee McDarby, Investec Corporate Treasury, said:
“It looks like RBS’ Mr Hester made a sensible decision to reject this year’s bonus after RBS have reported another annual loss, this time to the tune of £2 billion. This is £0.9 billion more than 2010’s £1.1 billion and will not go down well with the UK tax payer who owns 82% of the bank and has already voiced frustrations about how long it is taking to get the bank out of the red.
"This has had little impact on the pound so far this morning but Sterling is still wounded by the surprising Bank of England minutes that were released yesterday morning which highlighted two members of the nine member committee voted for more than the £50 billion increase that was implemented.
"A £50 billion increase had been priced in by markets, hence why there wasn’t a significant sell off in GBP earlier in the month when it was announced. Indeed, there has been a growing consensus since the announcement that £50 billion could be sufficient for the months ahead without another increase in May due to the encouraging run of economic figures.
"We have learnt in the past couple of years that investors do not like currencies associated with monetary easing such as the Bank of England’s Asset Purchase programme and therefore the pain endured by Sterling which has dragged GBP/USD down below 1.5700 could extend to test 1.5500 short term.
“The agreed bailout plan in Brussels is still being scrutinised by the market and the Euro-zone governments. The Greek parliament was working its way through the legislation required to ensure compliance with the ‘prior conditions’ of the programme, whilst the country also had to swallow another downgrade by Fitch to put them at C from CCC.
"It has been reported that Spain have asked the EU to ease its deficit reduction terms which is clearly not an encouraging sign and highlights that a package to avoid a short term Greek default has done little to mend the wider debt and structural problems in the Zone. We will learn more about the International Monetary Fund’s involvement in the package this weekend when G20 finance ministers meet and this will be a crucial component of reaching the €130 billion bail-out.
"The euro is holding up very well at the moment as investors’ confidence in the package continues to grow but we are still fundamentally dubious on the euro rally based on the expected challenges the area will face in implementing the second bail out and tackling the deeper fiscal issues.”
