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LONDON (AP) — Royal Bank of Scotland, which is majority-owned by British taxpayers, saw its loss in 2011 swell by 78 per cent as it booked large provisions for Greek debt and compensation for buyers of payment protection insurance.The bank, in which the government holds an 82 per cent stake, 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 per cent to 26.6 billion pounds largely on the back of a 25 per cent fall in revenue at the global banking and markets division.
Chief Executive Stephen Hester nonetheless said the effort to turn the bank around was “well ahead of schedule,” and described the larger loss as a byproduct of management’s success in 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 down 1.6 per cent at 26.9 pence on the London Stock Exchange.
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 bought payment protection insurance they didn’t need, 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 per cent from 2010.
Chairman Philip Hampton said “there are no shortcuts” to rebuilding a company saved by a 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 per cent to 5.9 billion pounds.
RBS is the second big British bank to report annual results. Barclays earlier announced a 15 per cent fall in net profit to 3 billion pounds, and part-nationalized Lloyds Banking Group publishes its results on Friday.