RBS figures expected to stay in red
Published 23/02/2011 | 15:11
Royal Bank of Scotland is expected to remain in the red tomorrow when the part-nationalised player reveals full-year figures.
Annual results from RBS will be pored over for clues as to when the UK government may start offloading its 83pc stake, taken in return for bailout cash at the height of the financial crisis.
Most analysts are pencilling in 2010 losses of £700m (€827m) against a £3.6bn (€4.25bn) loss in 2009, helped by lower levels of bad debts.
Investec Securities experts believe bad debt improvements helped the bank claw its way out of the red in the fourth quarter, forecasting net attributable profits of £482m in the final three months.
The bank's controversial bonus plans have already been revealed, announced at the time of the Project Merlin deal with British Chancellor George Osborne.
Chief executive Stephen Hester has been awarded a £2.04m bonus, but will only take the handout in shares deferred for three years and will not receive a pay rise this year.
Its investment bankers will share a bonus pool of under £950m, lower than the £1.3bn in 2009, and will have upfront cash payments limited to £2,000.
With bonus details out of the way, the attention will settle on its figures.
Sharply lower bad debt losses are largely expected to be behind the expected improvement, although RBS is predicted to reveal a hit from the economic woes in Ireland given its exposure through the Ulster Bank subsidiary.
Confirmation of a return to profit in the most recent quarter would reinforce speculation over Government plans to start offloading its shareholding.
RBS shares have also gained ground in recent weeks, thanks to rumours of an early exit from the UK government's toxic asset protection scheme and last week's news of a 32pc surge in profits at rival Barclays. Robust results from French group Societe General have also spurred on share gains.
The stock has risen 20pc in the past three months to just over 48p - but this is still below the 50.5p breakeven point for the government.
And UK Financial Investments (UKFI) - the body charged with managing government banking assets - has already said it was unlikely to press ahead with any sale until after the Independent Commission on Banking (ICB) reports back in the autumn.
The review is seen as a potential major hurdle for RBS and its fellow state-backed player Lloyds Banking Group.
The ICB could recommend splitting Lloyds in order to improve competition and may suggest separating investment and retail banking operations, which would hit RBS hard.
Lloyds reports its figures on Friday, which will represent a milestone as it is expected to mark the first annual profit since being bailed out amid the banking crisis.
Analysts are predicting pre-tax profits of £2bn at Lloyds against losses of £6.3bn in 2009.
Both banks are likely to face questions over how much corporation tax they pay after Barclays revealed last week it paid £113m in 2009 - a year in which it racked up £11.6bn in profits, including proceeds from the sale of Blackstone Global Investors.
Barclays said the tax bill was reduced by offsetting losses from credit writedowns, which is set to have a similar bearing on payments from RBS and Lloyds.