RBS chief Hester hits back over bonus row
Bank has become the poster child for what was wrong with banking industry before the financial crisis
James Moore is the Independent's Associate Business Editor and writes the Outlook City comment column from Tuesday to Friday. He also has a keen interest in disability issues and when not attempting to further injure himself playing wheelchair basketball.
Friday 24 February 2012
Royal Bank of Scotland yesterday launched a concerted fightback against the mounting outrage over its decision to spend £785m on bonuses despite reporting a £2bn loss – almost double the previous year's figure.
Stephen Hester, the chief executive, insisted that the bank was "in a vastly better position" than when he arrived, and hit back at critics of its bonuses, describing the debate as "damaging". He also said it could hamper the bank's attempts to return the taxpayer's £45bn investment in the company, which has become the poster child for much of what was wrong with the industry in the run-up to the financial crisis.
"The noise around RBS is damaging to the prospect of achieving the goals everyone needs of it," Mr Hester said. "So far in the latest three years we have overcome that noise, and we will try to keep doing that, but no one should be under any illusions that you can't have your cake and eat it."
He was backed by UK Financial Investments (UKFI), the government body charged with overseeing the taxpayer's stake in the banking industry, while RBS's chairman, Sir Philip Hampton, wrote to shareholders saying the bank had to be run on "a commercial basis".
It said: "UKFI believes that the [RBS remuneration] committee has exercised reasonable judgement in relation to its approach to total variable remuneration this year, consistent with the need to protect the interests of shareholders, both in relation to the financial results and the retention of employees."
The bonus pool was split, with £390m going to investment bankers for 2011, a fall of 58 per cent from 2010. This still represented an average bonus of £22,900.
The rest of the money was distributed across the remainder of the bank.
Mr Hester and Sir Philip passed on payments of nearly £1m and £1.4m respectively. Other executives are not expected to follow suit.
RBS is cutting thousands of jobs at its Global Banking & Markets (GBM) division – the name for the investment bank. It delivered a £95m loss during the final quarter of the year, but was profitable overall, producing earnings of £1.6bn against £3.4bn a year earlier.
The bank said this was no worse than rivals and pointed out that competitors – such as Barclays Capital – were more generous with bonuses. But average staff costs were stable at about £144,000 each, and unions remain furious. The banking union Unite issued an angry statement, criticising the bank's pay offer to ordinary staff.
Mr Hester said "core operating profits" at the parts of the bank he wants to keep came in at £6.1bn. However, he warned that his original, five-year plan for turning round the bank would probably have to change – while RBS is ahead of targets the economy makes life tougher.
But he added: "We have reduced our balance sheet by £712bn, or roughly three times the national debt of Greece."
The results received a less than favourable reaction from the City.
Ian Gordon, a banking analyst at Investec, said: "Another shocker from RBS? A £2.0bn attributable loss vs consensus expectations of only £0.9bn with GBM and non-core doing much of the damage."
Mr Gordon cited concerns about "a continuing absence of profitability" from RBS and said it was hard to see the shares rallying in the short term.
The bank is aiming to sell off its Direct Line insurance business by floating it, which could take place towards the end of the year.
- 1 Kermit the Frog has a new girlfriend named Denise
- 2 The excuses your boss is most likely to believe when you call in sick
- 3 Moscow voted the world's unfriendliest city
- 4 I'm pansexual – here are the five biggest misconceptions about my sexuality
- 5 More than 11,000 Icelanders offer to house Syrian refugees to help European crisis
The one chart that shows how George Osborne is almost certainly going to be our next Prime Minister
The excuses your boss is most likely to believe when you call in sick
Three-year-old ultra-Orthodox Jewish children told 'the non-Jews' are 'evil' in worksheet produced by London school
Bono's group has made more money from Facebook investment than from all his music
Wikipedia rocked by 'rogue editors' blackmail scam targeting small businesses and celebrities
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
Jeremy Corbyn calls Osama bin Laden's killing a 'tragedy' - but was it taken out of context?
Tony Blair attacks Jeremy Corbyn's 'Alice In Wonderland' politics
Theresa May says migrants should be banned from entering the UK unless they have jobs lined up
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
If you're not already angry about the refugee crisis, here's a history lesson to remind you why you really should be
iJobs Money & Business
£14000 - £16000 per annum: Recruitment Genius: This company was established in...
£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...
£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...
£20000 - £25000 per annum: Recruitment Genius: We are a vibrant and establishe...