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RBS takes big hit after ‘chastening year’

Last updated: 02:46 28 Feb 2013 EST, First published: 03:46 28 Feb 2013 EST

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Royal Bank of Scotland (LON:RBS) made a hefty loss in a “chastening year” that saw it embroiled in a number of scandals along with rival UK lenders.

The part state-owned bank made a pre-tax loss of £5.2bn largely due to big losses on the value of its own debt.

The bank suggested the government could soon sell its 82% stake in RBS as it is now “much closer” to being in good financial health. It also hinted that a dividend could be on the cards as the state of the bank continues to improve.

RBS's profits were also set back as it added £450mln to the pot to compensate customers who were mis-sold payment protection insurance (PPI), taking its total provision to £2.2bn.

Its part in the Libor rigging scandal cost it £381mln, while it has also set aside £700mln to pay back small businesses that were mis-sold complex interest rate hedging products.

Job cuts saw RBS save more than £500mln last year. Since 2009, the bank has made £2.7bn worth of savings, having axed over 22,000 jobs.

Chief executive Stephen Hester said: “2012 saw landmark achievements for RBS. It was also a chastening year. Along with the rest of the banking industry we faced significant reputational challenges as we worked with regulators to put right past mistakes.

“We are determined to overcome the cultural and reputational baggage of pre-crisis times with the same focus we have applied to the financial clean-up from that era.”

Hester added that RBS is four years into its recovery plan and has made good progress in the year just gone.

“We are a much smaller, more focused and stronger bank. Our target is for 2013 to be the last big year of restructuring,” he continued.

“There will be important work still to do, but an increasingly sound base from which to work.”

Hester also said the bank would start work on a partial float on Citizens. It is hoped RBS’s US banking business will list in two years’ time.

Shares opened 3% lower at 335p each.

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