RBS set to pay £1.3bn in bonuses
Royal Bank of Scotland is to pay bonuses totalling £1.3bn to its investment bankers despite expectations of grim annual results today.
The payout is thought to have been given the green light by UK Financial Investments (UKFI), the body set up to manage the Government's stakes in banks. RBS, which is 84% taxpayer-owned after a string of bailouts, is expected to post losses of more than £5bn for the year to December.
But it is the bank's controversial bonus pot that will prompt howls of outrage as it comes despite the deficit and an expected admission that it has not met Government lending targets.
RBS boss Stephen Hester, who has waived his own payout for last year, has said the bank must give competitive bonuses to its key staff, but would pay “the minimum we can get away with” to the investment bankers. They will receive their bonuses in shares rather than cash and this could be subject to clawback at a later date. The only cash bonuses will be paid to those earning under £39,000, who will get a maximum of £2,000 in cash.
The bank's results for 2009 pale in comparison with the £24.1bn shortfall for the year before. Mr Hester is engaged in a five-year plan for the beleaguered lender, aiming to return it to a healthy state so that the Government can recoup the £45.5bn it has pumped in to prop it up. He hopes to return it to profit in 2011, but has said the after-shocks from the recession “will take years to subside”.
Mr Hester's role has also been to break up parts of the business that have attracted the attention of Europe's Competition Commissioner in the wake of the huge levels of state support. The bank will have to sell 318 branches of the former Williams & Glyn's business in England and Wales and its NatWest branches in Scotland.
Under the terms of the Government bail-outs, RBS and fellow part-nationalised bank Lloyds Banking Group agreed to lend £39bn to homeowners and businesses in the year to February to boost credit in the economy.
Both banks have argued the appetite for loans has evaporated, but MPs have called for the Treasury to ratchet up the pressure to make the banks meet |their pledges.