State-rescued Royal Bank of Scotland has announced a net loss for 2009 of £3.6bn, after struggling with billions of pounds of bad loans. Despite the losses, the bank is set to announce it will pay bonuses of £1.3bn to its staff, adding that CEO, Stephen Hester, will waive his annual bonus. The bank, which is 84 per cent government-owned after a series of huge bailouts, said in a results statement that it had improved after suffering a 2008 net loss of 24.3 billion pounds - which was a record for a British listed company.

"We are one year into our five-year turnaround plan and have taken significant steps along the path to recovery," Stephen Hester said in the earnings release. "The strengths of our core business are becoming clearer, while the legacy of losses and exposures from the crisis is running off."

Mr Hester told BBC Radio 4's Today programme RBS had lost out by not paying bigger bonuses. "We've had a small experiment in this respect... some of our best-performing people have been leaving in their thousands," he insisted, adding: "The people who left us last year, I believe, would have increased our profits by up to a billion pounds beyond the ones that we've got."

One other controversial topic for the banks has been its role in lending to business and home buyers. Mr Hester again defended the bank's approach. He said he was satisfied that RBS was fulfilling both the letter and the spirit of its lending commitments, saying it had beaten its target for mortgage lending. He said the bank had not, however, reached its target for small business lending, partly because businesses, he said, were focused on paying off debt. The loss figure is lower than the £5bn many experts were expecting and is well below the £24bn it lost in 2008.

Mr Hester said he expected the bank to return to profit next year.