There were plenty of numbers to look at in the results of part-nationalised lender Royal Bank of Scotland (RBS), not all of them bad, but the ones that are likely to garner the most attention are the huge loss attributable to shareholders and the massive amounts paid out in bonuses.
The bank, which is 82% owned by the British tax payer, made a fourth quarter loss before tax of £1,976m, versus a loss of £8m the year before. This loss reduced to £1,798m after tax, so the tax-payer is still subsidising the troubled banking giant one way or another.
As for those bonuses, the bank paid out £985m across the whole of the group in respect of 2011, down 21% on last year's pay-outs, with the lion's share going to the investment banking division - Global Banking and Markets (GBM) - where bonuses totalled £390m, less than half the level that was paid out to GBM staff last year.
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Media reports on Wednesday suggested that the bank's management wanted the bonus figure for GBM to be half a billion quid but the enforcers from Her Majesty's Treasury leaned on them a little and persuaded them to tone down the bonanza.
Such high rewards are deemed politically unacceptable for a government-owned entity which dropped a bundle in the fourth quarter, although much of the red ink in the fourth quarter profit & loss ledger is down to "impairments" - accounting adjustments which do not actually reflect hard cash going in to or out of the bank's coffers.
Total income for the fourth quarter eased to £5,923m from £7,138m in the corresponding quarter of 2010, taking the total income for 2011 up to £26,571m (2010: £29,698m).
Operating profit before impairment losses was just over two billion quid at £2,003m, versus a profit of £2,601m in the fourth quarter of 2010. Pre-impairment operating profit for the whole of 2011 eased to £9,615m from £11,198m.
If the company report stopped there, British tax payers would probably sleep easy tonight, but from this point on the key financial data starts getting X-rated.
Fourth quarter impairment losses of £941m reduced core operating profit to £1,062m (Q4 2010: £1,671m). These losses exclude sovereign debt impairment and related interest rate hedge adjustments, of which more anon.
The group also made a "non-core operating loss" of £1,308m, though this was lower than the previous year's fourth quarter non-core loss of £1,616m. This loss has been racked up by parts of the bank that it is running down or hoping to sell off, reversing the years of ill-advised expansion undertaken under the now largely discredited previous management regime.
Non-Core's operating loss fell to £4,203m in 2011, an improvement of £1,302 million from 2010, with impairments falling by £1,557m, despite ongoing challenges in the Ulster Bank and real estate portfolios. Non-Core risk weighted assets (RWAs) fell by £60bn in 2011 to £93bn, an impressive achievement in the circumstances, though it came at a cost.
The non-core division focused on reducing capital intensive trading assets, with activity including the restructuring of monoline (bond insurance) exposures, which, at a cost of around £600m in 2011, achieved a reduction of £32bn in RWAs.
So, netting off the core operating profit against the non-core operating loss gives a fourth quarter operating loss of £246m, versus a profit the year before of £55m. For 2011 as a whole, the group made an operating profit of £1,892m, down from £1,913m in 2010.
Once all the accounting adjustments get applied, however, the picture becomes less pleasing.
In the fourth quarter, the fair value of the company's own debt - the corporate bonds it has issued - prompted a negative adjustment of £370m (Q4 2010: positive adjustment of £582m). This could be interpreted as a good thing, as it reflects the fact that if it wants to buy back its own debt, RBS will now have to pay more to do so than previously estimated.
Participation in the government's asset protection scheme - the safety net designed to put a floor under the bank's liabilities - saw another £209m wiped off the profits, but the figure was at least lower than 2010's fourth quarter charge of £725m.
There were no provisions in the fourth quarter for payments that might arise from the mis-selling of payment protection insurance (PPI) schemes in the past, but there was a £224m write-down in the value of the bank's sovereign debt holdings.
Throw in a £300m bank levy, £627m of "other items" (amortisation, restructuring costs and so on) and the loss before tax figure for the fourth quarter mounts up to the aforementioned £1,976m. Loss before tax for the whole of 2011 was £766m, versus a loss of £399m in 2010. The post-tax attributable loss for 2011 widened to £1,997m from £1,125m the year before.
The figures will obviously be picked over by the investment analyst community, but the initial reaction is positive with the shares up by just under a penny at 28.29p in the first hour of trading.
Meanwhile, Philip Hampton, the group's chairman, stuck up for the bank's management which recently came under intense public pressure to forgo bonuses it was contractually entitled to. Hampton said management's actions have made RBS safer and more stable.
"We have made good progress in three years. The balance sheet has been reduced by over £700bn from its peak. Our reliance on short-term wholesale funding, which stood at £297bn at the end of 2008 has been cut to £102bn. We repaid more than £20bn of government-guaranteed debt in 2011. At 10.6%, our Core Tier 1 ratio is one of the strongest among our peers," Hampton stressed.
That may all be true and most admirable, but the presence of a so-called casino banking element (i.e. the GBM investment arm) in a state-owned High Street bank and the bonus culture associated with it will most likely continue to draw most of the attention, at least on the front pages of the British press, which is why the division is being restructured.
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