By Clara Ferreira-Marques and Steve Slater
LONDON (Reuters) - Royal Bank of Scotland
That compares to a loss of 6.9 billion pounds ($10.6 billion) a year ago for the part-nationalized bank.
RBS, which had struck a cautious tone at the half-year, gave investors more room for hope on Thursday, signaling a "cautiously encouraging" outlook for the bank, though it said 2010 would be "a year of hard slog".
By 0820 GMT shares were up 5.8 percent at 38.2 pence, making it the top performing British bluechip, as investors were encouraged by a strong performance by its investment banking arm, Global Banking and Markets, and a more confident outlook for bad debts.
"The results send a lot of positive signals... impairment trends look better than I generally expected," analyst Joseph Dickerson at Execution said. "GBM looks strong relative to most peers, with the exception of Barclays."
Chief executive Stephen Hester said RBS, 84 percent state-owned, had balanced external political and public pressure to clamp down on payouts to staff with the need to pay competitive rates, adding its decision to pay around 1.3 billion in bonus was "not imposed from outside".
Hester said the staff losses were "damaging but not destructive", but said keeping and attracting talent was the biggest problem he faced and would remain so through 2010.
"We were treading an unenviable tightrope walk," Hester told reporters on a conference call. "We believe that in the context of the industry in which we operate we have been restrained and responsible."
RBS has been a lightning rod for public anger over bank excesses and pay, but the bank said it had received government consent for a pared-down bonus pool and confirmed Hester would waive his bonus.
PEAK IN BAD DEBTS?
RBS said impairments rose sharply to 13.9 billion, from 7.4 billion a year ago, but appear to have peaked. Fourth-quarter impairments fell 5 percent on the third quarter.
Global Banking and Markets, RBS's investment bank arm, provided a rare bright spot for the bank at the half year and did the same again for the 12 months, swinging out of the red with an operating profit of 5.7 billion pounds.
That compares to a year-ago loss of 1.8 billion, despite a "normalization" of market conditions in the second half after a bumper start to the year.
The bank said fourth-quarter revenues were flat on the previous three months and profits were "healthy", faring better than rivals who have on average seen a slowdown.
RBS also said it was making progress on asset sales forced on it by European competition authorities.
Its payment processing business WorldPay has attracted "considerable buyer interest" but the sale of over 300 branches is complex and not expected until 2011, it said.
The bank said the bank branches, focused on small and medium-sized business banking, had not attracted "the same queue" as its global payment processing arm, but would still hit a sweet spot for some buyers.
RBS posted a net loss attributable to shareholders of 3.6 billion pounds, from 24.3 billion a year ago, the largest ever UK corporate loss. Analysts polled by Thomson Reuters I/B/E/S/ had expected a bottom line loss of 5.7 billion.
(Reporting by Clara Ferreira-Marques and Steve Slater; Editing by Mike Nesbit)
($1=0.6521 pounds)
