UK state-owned bank RBS has reported a loss of £3.5bn for 2014, down from a £9bn loss the previous year.
The results were hit by a £4bn writedown on the sale of its US business, Citizens.
The bank's chief executive Ross McEwan confirmed he would not receive a bonus this year.
But RBS will still pay out bonuses from a pool of £421m, which is some 21% smaller than in 2013.
Royal Bank of Scotland Group
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Mr McEwan defended the size of the bonus pool.
Speaking on the Today programme he described it as "fair pay"
and said it was necessary to pay bonuses to attract people to carry out
"fairly technical jobs."
The bank is 79%-owned by the British taxpayer after a government-led rescue in 2008.
Chancellor of the Exchequer George Osborne has written a
letter to the new chairman of the bank, Howard Davies, saying he
expected the bank not to give bonuses to senior executives.
He wrote: "I would also expect that, as in the past, no
executive directors or members of the executive committee will receive
bonuses, despite improved profitability."
"Given the extraordinary support it has enjoyed in the past
from taxpayers, I know you recognise that RBS must remain a backmarker
on pay and continue to show responsibility and restraint."
Shrinking bank
RBS is in the midst of a major reorganisation.
The bank said it had reduced costs by some £1.1bn and will cut another £800m this year.
It is cutting back its corporate and institutional banking network from 38 countries at the end of last year to 13.
It will end investment banking in the Middle East and Africa and "significantly" reduce its presence in Asia and the US, concentrating instead on the UK and western Europe.
RBS said it was building a bank that was "stronger, simpler and better for both customers and shareholders".
Mr McEwan said: "What's really important is that given the success of the last year we want to go further and faster in reforming this bank."
Today's results show that after one-off costs are stripped out operating profits were £3.5bn last year, the highest since 2010.
Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers said: "There is little doubt that RBS is making progress
"Even so, with the finished product still some way off and no dividend to encourage investment in the meantime, the general consensus of the shares as a sell is likely to remain intact for now."
Fines and compensation RBS has put aside £2.2bn to cover "litigation and conducts costs".
The bank said it had reduced costs by some £1.1bn and will cut another £800m this year.
It is cutting back its corporate and institutional banking network from 38 countries at the end of last year to 13.
It will end investment banking in the Middle East and Africa and "significantly" reduce its presence in Asia and the US, concentrating instead on the UK and western Europe.
RBS said it was building a bank that was "stronger, simpler and better for both customers and shareholders".
Mr McEwan said: "What's really important is that given the success of the last year we want to go further and faster in reforming this bank."
Today's results show that after one-off costs are stripped out operating profits were £3.5bn last year, the highest since 2010.
Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers said: "There is little doubt that RBS is making progress
"Even so, with the finished product still some way off and no dividend to encourage investment in the meantime, the general consensus of the shares as a sell is likely to remain intact for now."
Fines and compensation RBS has put aside £2.2bn to cover "litigation and conducts costs".
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