RBS reports £3.5bn loss for 2014

UK state-owned bank RBS has reported a loss of £3.5bn for 2014, down from a £9bn loss the previous year.

The results were hit by a £4bn writedown on the sale of its US business, Citizens.

The bank's chief executive Ross McEwan confirmed he would not receive a bonus this year.

But RBS will still pay out bonuses from a pool of £421m, which is some 21% smaller than in 2013.

'Fair pay'

Mr McEwan defended the size of the bonus pool.

Speaking on the Today programme he described it as "fair pay" and said it was necessary to pay bonuses to attract people to carry out "fairly technical jobs".

The bank is 79%-owned by the British taxpayer after a government-led rescue in 2008.

Chancellor of the Exchequer George Osborne has written a letter to the new chairman of the bank, Howard Davies, saying he expected the bank not to give bonuses to senior executives.

He wrote: "I would also expect that, as in the past, no executive directors or members of the executive committee will receive bonuses, despite improved profitability.

"Given the extraordinary support it has enjoyed in the past from taxpayers, I know you recognise that RBS must remain a backmarker on pay and continue to show responsibility and restraint."

Thursday's results show that after one-off costs are stripped out operating profits were £3.5bn last year, the highest since 2010.

Analysis: Kamal Ahmed, Business Editor

Ross McEwan, when he's waded through the arguments about why bankers are paid lots of money, is running a bank that in many respects is on the road to recovery.

Its core operation is actually making a profit of more than £3bn.

That is for two reasons.

The bank has removed itself from a lot of tricky, low profit investment banking activities in countries where returns were volatile.

And, given its UK focus, it is gaining from the improvement in the economy.

RBS is now focused on providing relatively vanilla services to individuals and businesses in the UK and Western Europe, with a small operation in Asia.

And as the economy grows, those can be pretty lucrative businesses.

More from Kamal: The amazing shrinking bank

Cost cuts

RBS is in the midst of a major reorganisation.

The bank said it had reduced costs by some £1.1bn and will cut another £800m this year.

It is cutting back its corporate and institutional banking network from 38 countries at the end of last year to 13.

It will end investment banking in the Middle East and Africa and "significantly" reduce its presence in Asia and the US, concentrating instead on the UK and western Europe.

RBS said it was building a bank that was "stronger, simpler and better for both customers and shareholders".

However, Britain's biggest union Unite said it was seeking an urgent meeting with RBS for clarification over the impact the restructuring would have on jobs.

"Unite is deeply concerned that the announcement ... of further restructuring will unfairly impact low paid and administration staff" said senior union official Rob MacGregor.

"Already over 30,000 jobs have been cut from across RBS since the bailout in 2008."

Fines and compensation

RBS has put aside £2.2bn to cover "litigation and conducts costs".

These include fines and compensation payments for the mis-selling of payment protection insurance, a massive computer failure, the mis-selling of interest rate products to small businesses and the manipulation of the foreign exchange market.

The bank is also liable to face fines over its involvement in American mortgage products which were at the heart of the US financial crisis.

Shares fall

RBS shares were down 3.6% in late morning trading.

Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers said: "There is little doubt that RBS is making progress.

"Even so, with the finished product still some way off and no dividend to encourage investment in the meantime, the general consensus on the shares as a sell is likely to remain intact for now."