London - The Royal Bank of Scotland on Thursday reported a net loss of £24.1bn in 2008, the largest shortfall ever recorded by a British company and unveiled a massive restructuring plan that will offload many of its international businesses.
The already part-nationalised bank also said it will dump £325bn of toxic assets into a government insurance programme, a step that could result in the state increasing its stake to as high as 95%.
RBS chairperson Philip Hampton blamed the massive 2008 loss, which compared with a £7.3bn profit in 2007, on the "unprecedented turbulence" in financial markets and deteriorating conditions around the world.
The bank's revenue fell 15% to £25.87bn.
RBS chief executive Stephen Hester, who replaced Fred Goodwin after he resigned in the wake of the bank's financial downfall, refused to make forecasts for the current "difficult" year but said he was confident the restructuring and the government assistance would return RBS to "standalone strength."
The bank said it planned to shift £240bn, or 20%, of its funded assets to a noncore division. Those assets will then be disposed of or run down over the next three to five years.
Hester said the designated "bad" assets would be culled from a range of regions and businesses, but the bulk would come from the bank's underperforming Global Banking and Markets division.
The restructuring, which includes plans to cut more than £2.5bn from the bank's cost base, will leave the bank centered on Britain, with smaller, more focused global operations.
Voting rights
Meanwhile, RBS' participation with another £325bn in the government's asset protection programme was widely anticipated, though analysts had expected it to seek guarantees for only about £200bn in assets.
RBS will pay £6.5bn to the Treasury to take part in the programme, aimed at encouraging a return to lending by increasing the capital strength of banks. The cost will be funded by issuing new shares.
The government has agreed to take a new class of "B" shares worth £13bn, with the option for another £6bn worth.
That raises the possibility of the government taking on as much as £25.5bn in new capital in the bank, which Hester acknowledged could lift its stake from 68% to as much as 95%. However, he said the government had agreed to cap its voting rights to 75%.
The overhaul received a positive response from investors, with the bank's share price soaring 22% to 28p on the London Stock Exchange.
Panmure Gordon analysts said the asset protection programme, also expected to be taken up by Lloyds when it announces full-year earnings on Friday, came at a favourable price.
'A failure of this magnitude'
"While we do have concerns about further losses and capital strains ... we expect these concerns will crystallise over the next six months; for now, the markets will probably focus on the favourable terms of this bailout," the said in a note.
Hester said that investing more in the government programme would give the bank a greater degree of stability as well as allow it to fulfill an agreement with the government to increase its funding to its core British customer base.
He declined to comment in detail on potential job losses as a result of the restructure, but acknowledged that reports of the bank shedding 20 000 positions, or 10% of its work force, were "not unreasonable."
RBS' downfall in the wake of the global credit squeeze has been swift.
As recently as July 2008, The Banker magazine rated it as one of the world's top banks based on its tier 1 capital.
Goodwin and former chairman Tom McKillop both issued a public apology for their roles in the bank's downfall after resigning, but controversy over their huge salaries continued to rage on Thursday with revelations that Goodwin, 50, is receiving a £650 000 a year pension.
"You cannot justify these excesses, especially when you have got such a failure of this magnitude," Treasury chief Alistair Darling told BBC radio.
Darling said the Treasury had urged Goodwin to give up his £16m pension pot, but had not yet received a reply.
McKillop earlier this month acknowledged that RBS' decision to buy Dutch bank ABN Amro in December 2007 - when its investment banking business was heavily exposed to the complex financial instruments hit by the crisis - was a "bad mistake."
- AP