EDINBURGH (Reuters) - Loss-making Royal Bank of Scotland said it would prove next year that it had become “an opportunity” for investors, as a bumper pay deal for its boss was voted through amid anger against bankers’ pay.
“Our businesses are shaping up and our recovery is clearly underway,” RBS Chairman Philip Hampton said at the part-nationalised bank’s annual shareholder meeting.
“I believe that in the next year or so we will finally prove that RBS has become the opportunity we know it can and must be.”
Despite opposition from some investors, CEO Stephen Hester’s 7.7 million pounds long-term deal, unveiled last month, easily won approval when put to the vote.
“I don’t see why he should get a bonus when they’re still making a loss,” private shareholder Tom Wilson said at the AGM, referring to RBS’ 2010 losses of more than 1 billion pounds.
One of RBS’ top 25 investors had said, on condition of anonymity, that remuneration was a “big concern,” and corporate governance advisory group PIRC had urged shareholders to oppose the pay plans for directors.
However, the remuneration plans were approved by 99.2 percent of shareholders who voted, helped by the backing of UKFI, the state body that manages Britain’s 83 percent holding in the bank.
UKFI said its decision to back the pay deal reflected the fact that the executives’ remuneration would take the form of deferred share-based awards, as opposed to cash up-front, and would depend upon the company’s performance.
Many investors and members of the public are angry that banks bailed out with taxpayers’ money are paying millions to top staff while Britons grapple with below-inflation pay rises and harsh austerity measures.
Hampton defended Hester’s pay, saying it was “competitive by market comparisons, but by many comparisons is towards the lower end.” He also said that pay at RBS’s investment banking arm was “relatively low” compared with rivals.
A government-appointed banking commission has proposed ring-fencing retail banks from riskier investment banking units to make companies such as RBS safer.
Hampton said RBS would co-operate with the Independent Commission on Banking’s (ICB) findings but added that customers and shareholders faced higher costs from the proposed shake-up.
The chairman also said RBS was ahead of target in running off “non-core” loans as part of its attempt to shrink and make the bank “strong, safe and able to stand alone without government support.”
Its streamlining will see the transfer of most of the activities carried out by RBS NV, the Dutch legal entity, to the UK group over the next three years.
Hampton said RBS expects to sell its insurance business in the second half of 2012. Management actions there were beginning to turn the business around and underlying profitability is coming back towards more acceptable levels, he said.
Hampton added that RBS’ lawyers were currently examining a report by the Financial Services Authority (FSA) regulator into RBS’ huge losses during the credit crisis.
The FSA report into RBS is due to be published imminently, and is set to heavily criticise the former management team, which was led by ex-chief executive Sir Fred Goodwin.
Additional reporting by Sinead Cruise; Writing by Steve Slater; Editing by Will Waterman and Mike Nesbit