RBS announces record losses

The firm – already 70% state-owned – is raising the extra funds to strengthen its balance sheet and insure around 325 billion in toxic debts.

RBS will issue 13 billion in special 'B' shares to the Government, as well as a further 6.5 billion to take part in the Treasury's Asset Protection Scheme. It can also call on a further 6 billion if necessary.

RBS has already taken 20 billion in public funds.

While the Government's shareholding in terms of votes will be capped at 75%, its economic interest in RBS – its claim on RBS's assets – could rise to 95% depending on its future performance.

Chief executive Stephen Hester said: "The economic stake could be anywhere from 75% frankly all the way up to 95%."

Mr Hester also gave a strong signal that tens of thousands of job losses are on the way at the beleaguered bank.

He said he "wouldn't dissent" from reports that as many as 20,000 jobs could be lost.

RBS's annual losses of 24.1 billion for 2008 are the biggest in UK corporate history.

Derek Simpson, joint leader of Unite, said: "These historic and humiliating losses bring into sharp focus just how reckless RBS's former management team have behaved.

"The whole country is paying the price through job cuts and repossessions on a massive scale. It is time to take control and fully nationalise this bank."

RBS racked up bad debt charges of 7 billion and wrote off 16.2 billion, mostly on its disastrous acquisition of Dutch bank ABN Amro in 2007 and its US operations.

The bank – whose finances were weakened by the ABN deal – endured a disastrous year when the crisis sparked by Lehman Brothers' demise brought it to the brink of collapse.

In return for taking part in the Asset Protection Scheme – which Mr Hester described as "catastrophe insurance" for the bank – RBS has agreed to lend 25 billion over the next 12 months and a similar amount in 2010.

RBS will be liable for the first 19.5 billion in losses on the assets on the scheme and 10% of any losses above that amount.

Chancellor Alistair Darling said: "We want to ensure that by cleaning up the balance sheet, that by making sure RBS has enough capital, we can get through this period."

Mr Hester said: "Participation in this scheme would assist us in reducing risk for shareholders whilst providing greater support for UK customers via increased lending."

RBS is selling or winding down a total of 540 billion in assets and businesses over the next three to five years – mostly related to its investment banking business. Its Global Banking and Markets operation made operating losses of almost 11 billion last year.

Mr Hester – who took over in November after former boss Sir Fred Goodwin resigned – said the "primary task" for RBS would be to rebuild its stand-alone strength so the Government could sell down its shareholding in the coming years.

He said the key "building blocks" for the bank were recapitalisation, management changes, identifying problems and forming a new strategy, taking part in the APS to "give us a measure of stability" and an improving economic climate.

"What we now have ahead is the task of execution," he added.

But he also warned over prospects this year, saying that making any forecast for 2009 would be "hazardous". He said: "Happiness for shareholders in terms of profitability is likely to be a long haul."

Shares in RBS jumped 30% after the news of the extra Government support. Collins Stewart banking analyst Alex Potter said the 6.5 billion fee – 2% of the of the assets insured – was cheaper than previously reported.

But he added: "We cannot see material profitability in 2009. We hope that 2010 improves."

RBS LOSSES: MORE COVERAGE

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• Scott Reid on RBS: What a difference a year makes

• Online Poll: Should ex-RBS boss Sir Fred Goodwin give up his 650,000 pension?

• Salmond blames Westminster for Goodwin pension scandal

• Former QC forced to abandon civil action against RBS

• RBS to plough 325bn into protection scheme

Bail-out will strengthen RBS, Darling tells Commons

THE ailing Royal Bank of Scotland will emerge "stronger" after the latest Government bail-out, Chancellor Alistair Darling insisted today.

He told MPs 325 billion of the bank's assets would be placed in a taxpayer-backed protection scheme and the Government would take a further 13 billion stake in the institution, which today posted the biggest loss in British corporate history.

The Chancellor said in exchange for the Government support, the bank would lend an extra 25 billion to customers and restructure itself, "returning to tried and tested principles of banking".

Shadow chancellor George Osborne said he treated the latest package of measures to support the British banking sector with a "healthy degree of scepticism".

He demanded to know what the potential total exposure of the taxpayer would be.