The Royal Bank of Scotland yesterday revealed it had made its biggest loss since it was bailed out by the taxpayer six years ago.
The beleaguered lender was hit by more than £12billion in charges for impairments, legal charges and payouts to customers who had been mis-sold products such as payment protection insurance and complex “swaps” on loans.
The group is also facing a series of investigations after a report from UK Government adviser Lawrence Tomlinson accused RBS of driving firms to collapse to profit from their property assets.
Yet the bank, still 80% owned by the government, faced anger as it admitted to preserving a £576million bonus pool for staff as losses reached £8.2billion in 2013.
Chief executive Ross McEwan pledged to rebuild trust in the Edinburgh-based bank with a mammoth overhaul that will slash costs by £5billion within three years and see it shrink from seven divisions to three.
He warned of further job losses, with back-office staff expected to be particularly badly hit.
Leaked details of the bank’s restructuring plan earlier this week suggested that job cuts could reach into the tens of thousands.
Mr McEwan said this will involve “difficult choices on jobs in the years ahead”, although he said it was too early to comment on numbers
Mr McEwan said the changes were necessary in order to create a “smaller, simpler and smarter” bank.
“We cannot spend money as though we are in profit when we have lost £46billion in six years,” he said.
The group said that, excluding the £4.8billion costs of creating an internal “bad bank” to hive off troubled assets, it made an operating profit of £2.5billion last year, 15% lower than in 2012.
The bank’s results confirmed there was no hope of an imminent sale of the government’s stake in the business.
Mr McEwan said RBS was “not yet strong enough” to be privatised.
He said: “The journey to recovery and renewal is harder than was first anticipated back in 2008. There is no point avoiding this inconvenient truth.”
The group’s structure will be simplified into just three units: personal and business banking; commercial and private banking; and corporate and institutional banking.
The planned flotation of its US retail bank Citizens will remove some 18,500 jobs, while further reductions will come from its initial public offering of the Williams & Glyn’s branch network, which employs around 4,500 staff.
Last night the group also announced it had raised £1billion from the sale of its remaining stake in Direct Line Insurance.
The bank floated the owner of Churchill and Direct Line in October 2012, and must offload the entire company by the end of this year as part of conditions of its £45billion state bailout.
Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said the bank’s results “make for grim reading as RBS continues to wrestle with the legacy of its troubled past”.