RBS chief 'in line for £1.6m bonus'

Royal Bank of Scotland chief executive Stephen Hester could be in line for a bonus of up to £1.6m (€1.82m) this week despite the bank's predicted hefty losses, it was reported today.

Royal Bank of Scotland chief executive Stephen Hester could be in line for a bonus of up to £1.6m (€1.82m) this week despite the bank's predicted hefty losses, it was reported today.

The RBS boss has not yet decided whether to accept the pay deal, which could be announced with the bank's 2009 results, according to The Sunday Times.

The pressure is on for Mr Hester, along with Lloyds Banking Group chief executive Eric Daniels, to waive any entitlement after Barclays' bosses declined their payouts.

Controversy over remuneration is set to dominate the RBS and Lloyds results this week, with the banks together expected to announce staff awards of around £1.5bn (€1.71bn).

RBS, which is 84% owned by the British taxpayer after a series of government bailouts, will account for the lion's share of that figure and is predicted to be lining up a bonus pot totalling £1.3bn (€1.47bn) for its investment bankers.

The bank, which last year posted the biggest annual loss in UK corporate history, is expected to report a narrower shortfall of around £5.3bn (€6bn) when it announces its results on Thursday.

Mr Hester is in the midst of a five-year turnaround plan to restore RBS to health after taking on the job at the height of the financial crisis.

His own remuneration payments are based on his efforts to restructure the bank as well as its profitability.

He has said he will pay "the minimum we can get away with" in bonuses, but insists that profits from the investment banking division will be crucial in getting RBS back on its feet.

Lloyds, which is 41% taxpayer owned, is expected to post pre-tax losses of around £3.8bn (€4.32bn) on Friday as it continues to suffer the ill effects of its rescue of HBOS.

According to a report in the Independent on Sunday, Mr Hester and Mr Daniels are set to meet representatives from UK Financial Investments (UKFI) this week to thrash out a deal on bonuses that will appease public anger.

It is understood that both could be persuaded to agree much more modest packages than they are entitled to.

Barclays, which did not accept direct state help, has said its top bosses Bob Diamond and John Varley would not take bonuses for last year.

UK Business Secretary Lord Mandelson today warned that it was not the time for Mr Hester to collect a reward for his work at RBS.

Asked about the issue on the BBC1's 'Andrew Marr Show', he said: "What I would say to RBS is this and to their chief executive Stephen Hester, who is a rather strong and rather able man but whose performance and delivery has not yet been tested: if further down the line in years to come he has done well and he has turned round RBS he deserves something back for it and I would be the first to say so, but not now."

He added: "What we have said to them is that their priority is repairing their balance sheets and getting their capital back in place and lending again fully.

"The bonus pool they have indicated is very much at the lower end of the banks."

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