Royal Bank of Scotland (RBS) has reported losses of £3.6 billion but says the worst of the banking crisis may be over.
The troubled bank, which is 84%-taxpayer owned, says the losses show it has moved further down the long road to recovery. The market had been expecting losses of around £5 billion with the legacy of bad debts still weighing heavily.
Last year, the part-nationalised bank unveiled a record loss of £24.3 billion after the financial crisis ravaged its balance sheet. Bad debts almost doubled to hit £13.9 billion.
However, RBS says the worst may be over with fourth-quarter impairments down 5% on the third quarter.
Chairman Philip Hampton adds: "The economic backdrop was the most difficult for very many years, though there was a gradual improvement as the year progressed. We have put in place the building blocks of our recovery plan and have begun the process of restoring the company to good health."
Global Banking and Markets, the investment banking arm at RBS, was getting back on form with operating profits of £5.7 billion compared to a loss of £1.8 billion last year. Business proved slower in the second half after a lucrative start to the year amid volatile markets.
UK Financial Investments, the body set up to manage the government's stakes in the banks, this week approved a £1.3 billion bonus pot to be split between staff at the high performance division.
This equates to 27% of revenues at the bank, which is 84% owned by the state after £53.5 billion of taxpayer support.
Those receiving more than £39,000 will receive their bonuses in shares rather than cash and this could be subject to clawback at a later date.
RBS has been grappling with a mass exodus of top talent after the government curbed its bonus payments. RBS boss Stephen Hester says these losses were "damaging but not destructive". However, he adds that the bank's performance could have been up to £1 billion better if topbankers had remained in their jobs.
Hester will be waiving his own £1.6 million bonus.