STATE-RESCUED Royal Bank of Scotland said yesterday its net losses ballooned to almost 2.0 billion in 2011, hit by the Greek debt crisis, restructuring costs and compensation payments linked to insurance mis-selling.

Losses after tax widened to 1.99 billion (2.35 billion euros, $3.12 billion) from 1.12 billion in 2010, RBS said in a results statement.

The group suffered its fourth successive year of steep losses since it was bailed out by the British government at the height of the global financial crisis in 2008.

RBS, 82 per cent owned by the state, said pre-tax losses soared 92 per cent in 2011, while profits at the bank’s investment division tumbled 54 per cent.

The Edinburgh-based lender added that it paid staff a total bonus pot of 785 million, down 43 percent compared with 2010. That included 390 million for its 17,000 investment banking staff, down 58 percent.

“After the effect of several large one-off items such as … compensation costs, Greek sovereign debt impairments, and integration and restructuring costs, the group reported a pre-tax loss of 766 million,” the bank said.

RBS took an enormous 1.1 billion writedown on the value of its Greek government bonds.

The company has also been hit hard by having to pay compensation of hundreds of millions of pounds to its customers who were mis-sold insurance policies.

RBS has slashed tens of thousands of jobs since it was bailed out by the state and has also sought to offload non-core assets as it seeks to return to profitability.

Chief executive Stephen Hester told reporters: “Our job is to diffuse the biggest-ever time bomb in banking balance sheets. In this respect, we are making progress.”

Ahead of the results, Hester bowed to public anger last month and waived his annual bonus of shares worth 963,000 on top of his 1.2 million salary.

The large bonus, coming amid government austerity and economic gloom, had sparked outrage among trade union leaders and opposition politicians because RBS has been almost fully nationalised.

In January meanwhile, the former chief executive of the Royal Bank of Scotland, Fred Goodwin, was stripped of his knighthood by Queen Elizabeth II over his role in the bank’s near-collapse in 2008.

British finance minister George Osborne welcomed Thursday’s cut in the bonus pool but stressed that it was in the nation’s interest that RBS received the necessary backing to return to health.

“The new management team at RBS are cleaning up the mess after the biggest bank bailout in history … These results show that they are doing just that,” Osborne said.

“It’s right that bonuses at the investment bank are less than half what they were last year and less than a third of what they were in 2009,” he said.

“But our main interest should be to get back as much money as possible for taxpayers and we must not let those that want to create an anti-business culture put that at risk.”

Since 2008, the state has injected a massive 45.5 billion into RBS, which needed saving from the US housing market crash and a disastrous multi-billion-pound takeover of Dutch rival ABN Amro in 2007.

“The job of rebuilding the group is far from complete,” RBS chairman Philip Hampton said on Thursday.

“The need to address the legacy of losses in a number of businesses means that the group is not yet profitable, although in 2011 our core businesses earned a profit of six billion,” a figure that sent the bank’s shares higher.

RBS recently said it would cut 3,500 more jobs over the next three years as the group shrinks its investment banking activities — bringing to 34,000 the number of posts the bank has slashed since late 2008.

Its shares jumped 5.09 per cent to finish Thursday at 28.72 pence on London’s FTSE 100 index, which closed up 0.36 per cent at 5,937.89 points.

RBS’s results were published one day before another bailed-out lender, Lloyds Banking Group, was due to unveil its annual figures. LBG is 40.2 percent owned by the government.