U.K. lender Royal Bank of Scotland saw its loss in 2011 swell by 78 percent as it booked large provisions for Greek debt and compensation for customers missold payment protection insurance.
The bank, in which the government holds an 82 percent stake following its near-collapse in 2008, on Thursday reported a worse-than-expected net loss of 2 billion pounds ($3.1 billion) for 2011, compared with a loss of 1.13 billion pounds the previous year. Income was down 11 percent to 26.6 billion pounds largely on the back of a 25 percent fall in revenue at its global banking and markets division.
Chief Executive Stephen Hester nonetheless said the effort to turn RBS round was "well ahead of schedule," and described the larger loss as a result of defusing "the largest balance sheet risk time bomb ever assembled in history."
"The irony is, the faster and more successful we go in defusing that balance sheet time bomb, the greater the losses," Hester said in a BBC radio interview.
"In three years since I took over, we have reduced the balance sheet of RBS by 700 billion pounds of assets, which to put in context is something like twice the size of the total debt of Greece," he added.
RBS shares were up 4.5 percent at 28.27 pence in late morning trading on the London Stock Exchange, rebounding from an early drop.
Gary Greenberg, analyst at Shore Capital, said the biggest disappointment was the decline in revenues, though he backed RBS' emphasis on rebuilding its balance sheet over profitability as "the correct strategy."
Impairments included 850 million pounds for compensating people who were missold payment protection insurance on loans taken out with the bank, and 1.1 billion pounds for Greek debt. That was offset by a 1.8 billion-pounds gain on the fair value of the bank's own debt.
RBS set aside 785 million pounds for staff bonuses, down 43 percent from 2010.
Treasury chief George Osborne said the government was pleased that RBS had reduced its bonus pool, "but our main interest should be to get back as much money as possible for taxpayers."
The break-even price on the government's investment in RBS is about 50 pence per share. Chairman Philip Hampton said "there are no shortcuts" to rebuilding a company saved by the 2008 45.5 billion pounds bailout, the world's most expensive bank rescue.
"We all understand that a company that is making losses at the bottom line tests the patience of those who depend on it," Hampton said.
"However, the restructuring task we have undertaken at RBS is unique in its scale and complexity, and needs to be phased in line with our ability to fund and execute it," he said.
In the fourth quarter, RBS reported a net loss of 1.8 billion pounds, compared with a profit of 1.2 billion pounds in the previous three months. Income was down 6 percent to 5.9 billion pounds.
RBS' insurance division, which it must sell to comply with conditions for its bailout, returned to profit last year. Operating profit of 454 million pounds reversed a loss of 295 million pounds in 2010; net claims fell from 4 billion pounds to 2.8 billion pounds.
The bank hopes to spin off the division through a market flotation later this year.
RBS is the second big British bank to report annual results. Barclays earlier announced a 15 percent fall in net profit to 3 billion pounds, and part-nationalized Lloyds Banking Group publishes its results on Friday.
Operating losses at RBS' Ulster Bank division, based in Northern Ireland, were up 35 percent to just over 1 billion pounds as impairments grew in its mortgage book.
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