The Royal Bank of Scotland, Britain's largest government-owned bank, reported Thursday a smaller net loss for 2010 after returning to profit in the final quarter of the year and said its recovery from the crisis was ahead of schedule.
The 1.1 billion pound ($1.8 billion) loss was an improvement on a 3.6 billion pound loss in 2009 and a 24.3 billion pound loss in 2008, but the bank's share price took a hit as it missed analysts' expectations.
RBS also faced criticism from unions after revealing it plans to pay out bonuses totalling 950 million pounds to its investment banking staff.
The bank returned to the black in the final quarter of last year, posting a small net profit of 12 million pounds, compared with a 765 million pound loss in the same quarter in 2009, even though it took a 1.1 billion pound charge at its Irish subsidiary, Ulster Bank.
Money set aside for bad loans fell 33 percent to 9.3 billion pounds over the year.
Chief Executive Stephen Hester, who was brought in by the government to replace disgraced former CEO Fred Goodwin, said the bank's recovery is "ahead of schedule" two years on from the global financial crisis.
Hester highlighted the bank's return to operating profit last year _ a 1.9 billion pound gain compared with a 6.1 billion pound loss in 2009.
"In 2010 we made big strides in risk reduction and an early return to operating profits," Hester said. "We have much work still to do and there are significant obstacles still to overcome. We aim for continued progress this year."
Richard Hunter, head of U.K. Equities at Hargreaves Lansdown Stockbrokers, said RBS has "shown that its recuperation continues, with the shape of the latest version of the bank beginning to emerge."
But he added that the shares "will still be avoided by income-seeking investors, with no return to a payment of the dividend yet in sight.
"The majority government stake will also continue to provide a technical overhang which could hinder share price growth."
The stock was down 2.9 percent at 45.95 pence in midmorning trade on the London Stock Exchange.
Ian Gordon, an analyst at Exane BNP Paribas, said it was still "far too early to crack open the champagne" and the stock has been overpriced compared to its competitors.
"On a first read of today's numbers, our advice to investors is to keep on running," Gordon wrote in a note.
RBS is 84 percent owned by the taxpayer after accepting a 45 billion pound state bailout at the height of the credit crisis in 2008, a fact that has placed its earnings report under great scrutiny.
Much of the attention Thursday was on the bank's bonus payments. It capped the bonus pool for its investment banking arm at 950 million pounds for 2010, down from the 1.3 billion it paid out in 2009, and capped cash bonuses at 2,000 pounds.
But the proportion of revenue the bank uses to pay its investment banking staff rose to 34 percent from 26 percent.
Hester confirmed he would accept a 2.04 million pound bonus to be paid in shares and deferred for three years.
"Taxpayers will today be baffled as to how it is possible that while we own 84 percent of this bank it continues to so handsomely reward its investment bankers," said Len McCluskey, the general secretary of the Unite union. "This is an institution in which over 21,000 front-line and support staff have been sacked, RBS still refuses to lend enough to small businesses and bonuses are free flowing."
Hester said that the board was committed to restoring RBS to standalone strength to enable the government to sell its holding "profitably over time," but he did not comment further on the timetable for any sell-off.
Any sale is unlikely before the body set up to investigate problems in the banking sector, the Independent Commission on Banking, publishes a report in September.
Qatari Prime Minister Sheikh Hamad bin Jassim reportedly told British Prime Minister David Cameron this week that he was open to investing in RBS. Qatar, the world's biggest exporter of natural gas, has a multibillion pound sovereign wealth fund.
RBS's results will be followed on Friday by rival part-nationalized bank Lloyds, which has also warned of a hit to earnings from Ireland.
Barclays PLC, which shunned the state bailout, last week reported a strong rise in 2010 net profit to 3.56 billion pounds from 2.63 billion in 2009.