I’m working my way through the latest annual reports of your favourite FTSE 100 companies, looking for insights into their businesses. Today, it’s the turn of Royal Bank of Scotland (LSE: RBS) (NYSE: RBS.US).
Executive pay
Bankers’ pay continues to be a bone of contention, so I made straight for the remuneration section of RBS’s annual report. I learned that chief executive Stephen Hester — who will be stepping down next month after five years with the bank — earned a base salary for the year of £1.2m and received total remuneration of £1.6m.
I can tell you that Hester’s total remuneration was less than half that of Lloyds’ chief executive Antonio Horta Osorio, and four-and-a-half times less than top paid bank boss Stuart Gulliver of HSBC. RBS’s remuneration report was given the blessing of shareholders at the company’s AGM: over 99% of votes cast were in favour of the resolution to approve the report — the biggest majority of all five banks.
Impairment charges
In addition to the relatively modest executive remuneration at RBS, I was encouraged to learn that annual impairment losses continued to fall at the bank. The company gave numbers for the past three years, summarised in the table below.
|
|
2010 |
2011 |
2012 |
| Impairment losses | £9.2bn | £8.7bn | £5.3bn |
| Reduction | 39% | 5% | 39% |
I can tell you that the bank’s impairment losses had peaked at just shy of £15bn during 2009; so there’s been a great improvement over the four years.
Net asset value
I learned that tangible net asset value (TNAV) per share was 446p, down 11% from a year earlier. However, I note that RBS’s told us in its recent 9-month results for 2013 that TNAV per share was now 431p — a reduction of 3% (or 4% annualised).
It’s encouraging to see the decline in TNAV moderating to such an extent, because I like to use an asset valuation for banks. At a current price of 330p, RBS’s shares are on offer at a 23% discount to TNAV. Put another way, investors are paying 77p for every £1 of assets on RBS’s books.
