RBS turnaround ‘may take five years’ after £24bn loss

RBS reported a loss of £24.1 billion, slightly less than it had forecast last month. Hester said: "Today we have put three very important bricks in place on the road to recovery but no one should think it is going to be anything other than a long and difficult haul."

The former investment banker, who was parachuted in by the Government when it rescued RBS by taking a 68% stake in return for £20 billion of new capital, said: "The transactions we have announced today are not immediately great news for shareholders."

Hester confirmed that thousands of jobs will go as the bank, which owns NatWest, pulls out of 36 of the 54 countries in which it runs businesses. He does not disagree with analysts who reckon it could cut as many as 20,000 out of a workforce of 215,000. Up to half the job losses will be in this country.

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Minutes before it released its figures to the stock market, RBS agreed with the Government a deal to put £325 billion of its worst loans and structured financial products into the Asset Protection Scheme the Treasury launched today.

RBS will also create a "non-core" division in the late spring or early summer, which will contain £540 billion of its most toxic assets. It plans to run off or liquidate these over the next three to five years. Today's loss was less than the £28 billion predicted last month because writedowns were £16 billion rather than £20 billion.

Hester said: "The scale of the loss says everything about the past and the scale of task ahead of us. But it's worth noting that all areas apart from the investment bank made profits last year."

He described his restructuring as "sweeping", promising that no part of the bank would be left untouched with all businesses being set new targets and cost-cutting ambitions. He admitted "We will inevitably have setbacks and make mistakes along the way."

Hester said he wants to cut costs across the bank by £2.5 billion a year within three years. That is equivalent to shedding 16% of last year's cost base, and could mean even more job cuts.

Under today's agreement with the Treasury, the Government will buy up to another £19 billion of new RBS shares. These will be non-voting, but will raise the taxpayer's stake to 84%. RBS will pay £6.5 billion for this and increase its lending for mortgages and business loans by an extra £25 billion this year and in 2010.

RBS picks up the first £19.5 billion of losses on the guaranteed assets. After that, the losses are split 90% to the Treasury and 10% to the bank. Martin Slaney, head of derivatives at GFT, said: "The net loss is better than expected, and at 2% the participation fee in the protection scheme is also more favourable than was forecast. However, there is still a sense with RBS that nationalisation is inevitable."