RBS' Hester stays upbeat as losses soar to £2 billion

He said: "I have two jobs to do. The first is to carry on running a normal bank. The second is to defuse the ticking bomb we inherited."

Net losses at RBS jumped from £1.1 billion to £2 billion in 2011 as it was hit by a £850 million charge for mis-selling payment protection insurance and a £1.1 billion write-down on its Greek debts. Pre-tax losses rose from £249 million to £766 million.

The group's investment bank, which RBS has been ordered to scale back, saw its profits more than halved. They were down by 54% at £1.6 billion on far tougher financial markets and reduced deal making.

Hester, however, said that the core bank's operating profit was £6.1 billion, which he pointed out was "pretty reasonable against our most comparable competitor, Barclays."

He also argued that increased losses were actually a good thing.
"Ironically, the better we do at reducing risk the faster we take losses through the bottom line," the RBS boss said. "I know that losses test some people's patience.
"Dealing with those legacy losses will put the company on a sustainable footing for generations to come. There are no shortcuts."

He pointed out that on his watch "we have reduced our balance sheet by £712 billion or roughly three times the national debt of Greece".

Hester also said that he now expects the first sale of shares in RBS Insurance (now renamed Direct Line) to take place in the autumn.
Analysts reckon that the business, which swung from operating losses of £295 million to profits of £454 million last year, could be worth as much as £5 billion.

Hester said the shares could be sold off in at least three separate tranches over a period of time.

Elsewhere, UK retail operating profits were up by 45% to £2 billion, corporate banking profit fell 3% to £1.4 billion, and wealth management profits rose 6% to £321 million.

In addition, global transaction services profits dropped 16% to £743 million after one particular write-off, Ulster Bank losses increased 35% to £1 billion and profits from the US grew 57% to £479 million.

Hester also admitted that his original, five-year plan for RBS would now have to change.
He said: "We are actually ahead of the targets we set ourselves at the three-year mark.
"However, changes in terms of the world regulation of banks mean that we will have to go further than we expected in terms of conservatism on the balance sheet. At the same time, economic conditions are worse than expected which will slow progress and reduce profitability," he added.

Meanwhile, the bank's shares, for which the taxpayer paid an average of 49.9p in its 82% stake, rose by 0.94p to 28.27p today.