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RBS closer to sale of UK Govt stake

Thursday, February 28 12:31:27

Royal Bank of Scotland has reported its strongest underlying profit since the financial crisis, potentially paving the way for Britain to sell its 82 percent stake if some big hurdles are overcome.

The bank had to be rescued in a 45.5 billion pound ($68.9 billion) state bailout during 2008 but the government has begun looking at ways to sell off its holding as RBS starts to return to financial health.

"The light at the end of the tunnel is coming closer," Chief Executive Stephen Hester said today. "Our job is to deliver a company that is doing its job well and that other investors will want to invest in."

RBS made an operating profit of 3.5 billion pounds ($5.2 billion) last year, up from 1.8 billion the year before and the highest since its 2008 bailout.

The bank paid out 607 million pounds in bonuses for 2012, down 23 percent from 2011.

RBS has cut about 302 million pounds from bonuses, clawed back from past awards or to be cut from future payments to account for behaviour related to the rigging of interest rates, for which the bank was fined $612 million.

Bankers in Europe will have bonuses capped in future after agreement in Brussels on pay limits to try to curb financial sector excess.

Hester, brought in following the government rescue, has overseen what he describes as the largest turnaround in corporate history. RBS has shed around 900 billion pounds worth of assets while he has been in charge.

Chairman Philip Hampton said the bank was "much closer now to being in the good financial health that would allow shareholders to receive a dividend and the government to start to sell its stake".

Britain is considering a range of options for privatising the bank including giving shares away or selling shares to the public at a discount.

In the meantime, RBS will further reduce the scale and scope of its investment banking business. The bank plans to cut its risk-weighted assets by 20 percent to 80 billion pounds from 101 billion at the end of 2012.

RBS and other big British banks are under pressure from the government to lend more to households and small businesses to help to revive the country's weak economy.

Finance Minister George Osborne welcomed RBS's plans to shrink its investment bank further.