£4m staff windfall as bank profits rise

Feb 29 2008 by Peter McCusker, The Journal

MORE than 2,000 North East bank staff are to share almost £4m after the Royal Bank of Scotland unveiled profits of £10.3bn despite further losses from the credit crunch.

Underlying profits at the UK’s second biggest bank, which owns NatWest, were 9% higher than the previous year, in line with City forecasts.

But write-downs on investments hit by last summer’s financial turmoil and the crisis in the US sub-prime mortgage market rose to £2.14bn, the bank said.

RBS has 58 branches -– through both the RBS and NatWest brands – in the North East and employs 2,037 in the region.

These staff and the rest of the company’s 100,000-plus employees will be rewarded with a profit share payment of 10% of their annual salary, for the 10th consecutive year.

Despite a worsening economic environment, the bank said a more cautious approach to lending had seen its overall bad debt losses fall 1% to £1.87bn. RBS added that retail banking profits rose 10% to £2.47bn, with deposit balances up 9%.

UK business banking also lifted operating profits 11% to almost £2bn, offsetting the decline in earnings from investment banking. Its Citizens banking business – exposed to the faltering US economy – also saw profits fall and bad debt charges more than double, reflecting the impact of a softer housing market and a weaker dollar.

Chief executive Sir Fred Goodwin said prospects for 2008 were “difficult as ever to predict” but added that there was good momentum behind the enlarged bank following the acquisition of ABN Amro.

There have been concerns in the City that RBS overpaid for the Dutch bank and questions over the bank’s capital position following its investment losses.

But the bank added that its capital remained within target ranges and also cheered investors with a 10% hike in the annual dividend.