Royal Bank of Scotland will walk into a new row over pay as it prepares to finalise the size of its bonus pool for 2013 and make payouts worth hundreds of millions of pounds to its staff.
No formal indication about bonuses have been made to UK Financial Investments, the body that looks after the taxpayers' 81% stake in the bailed-out bank, but it is understood that the size of the pot could be about £500m. That would be down a third on the £800m handed out last year but will still cause controversy.
The bonus payments are traditionally handed out after its results, which are due on 27 February. The bank is now expected to show an £8bn loss after Monday's announcement that mis-selling scandals and legal bills in the US were forcing it to take a £3bn hit.
Analysts at Credit Suisse calculated the bank's total losses since the 2008 bailout would reach £43bn, almost as much as the £45bn pumped in by taxpayers to buy shares in RBS to stop it collapsing.
The bank's share price, which slumped 2% on Monday, gained 3.5% on Tuesday to 343p after analysts said new boss Ross McEwan was taking steps to bring forward losses that investors had been preparing for. But chancellor George Osborne said there was little chance of a sale of any of the 81% taxpayer stake, currently worth £14bn less than the government paid for it in 2008 and 2009.
Osborne, who is expected to signal a future sale of a tranche of Lloyds shares next month, told the BBC: "We have not reached the point where we are thinking of selling the Royal Bank of Scotland. I have made that clear. With RBS, I do not think a sale of RBS shares is on the cards at the moment".
The top management team have waived their bonuses for 2013 but other staff will expect to receive payouts, including Rory Cullinan, who is to run the new bad bank being set up by RBS.
The bonus pool for 2013 will not be affected by the new EU bonus limits, which will restrict payouts to 100% of salary unless shareholders give approval for payments of 200% of salary. The impact of those rules will be felt in bonuses handed out next year and RBS is expected to ask shareholders to vote at its annual meeting in May to allow payouts of 200%.
Gareth Hunt, analyst at Canaccord Genuity, said McEwan was "clearing the decks" and that restructuring charges could also be announced with the results next month.
Ian Gordon, analyst at Investec, said that he expected another £1bn to be added to the £1.9bn set aside to cover potential law suits connected to the subprime mortgage crisis. He also wondered whether the extra £465m provision for misselling payment protection insurance - included in RBS's £3bn figure - could have an impact on Lloyds Banking Group, which has already incurred an £8bn bill for the scandal.
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