The chairman of RBS has claimed that not enough firms are seeking out loans from the partly state-owned bank

Speaking to the Post after the lender revealed losses of £5.2 billion for 2012, Sir Philip Hampton said he believed the bank would continue to play a key role in the region – but he dismissed criticisms it was not lending.

His comments came as the Bank of England revealed overall lending in the UK had dropped 19 per cent in 2012, despite the government’s Funding for Lending Scheme aimed at getting cash into the hands of businesses

But Sir Philip dismissed criticisms that banks were not lending, particularly to small firms.

“SME lending is a key part of our business,” he said.

“I am sometimes surprised by observers saying we are not lending. We are in the business of lending to SMEs and other corporates and are short of loan opportunities.”

He added: “We have plenty of capital to make available to small businesses.

“One of the messages we want to get out is that we are very much open for business to small businesses.

“We are the largest corporate bank in the UK and if there are credit-worthy customers we would love to see them and make loans and other services available to them.

“Not enough people are coming forward to borrow. Like many of the banks we would like to see them come forward and borrow money from us.

“There is no problem with the availability of money to lend to SMEs – but we are short of applications.”

But Sir Philip was adamant the bank would continue to play a major role in the region.

“In Birmingham and the West Midlands as a whole we are a very substantial employer and it is a key part of our market,” Sir Philip told the Post.

“The assumption is we will continue to be very strongly represented there. We know we have a big part to play in local economies.”

The bank’s chairman also reiterated its commitment to a return to the private sector by the end of 2014 due to improvements in the core bank which would herald a return to financial health and enable the Government to begin offloading its 81 per cent stake.

“Our objective to put the business in a position in 2014 where the Government will have the option to begin to sell its stock,” he said.

“We are making progress in fixing RBS. We have a more profitable core bank and are dismantling the non-core bank. We are moving in the right direction and step by step we are rebuilding this bank.

“If you look back to 2008 the first task was to stabilise the company and to make it stand on its own two feet.”

Sir Philip said RBS “continued to make very good progress in building financial resilience” and listed achievements in 2012 such as a lower balance sheet, the DirectLine IPO and the fact all loans were now funded by deposits in contrast to its “worst point” when it was “highly borrowed”.

Although the notion of British taxpayers becoming shareholders following a government sell-off would not be welcomed, Sir Philip said the bank would work with the Government whatever it wanted to do.

“It is up to the Government and we will have to work with them in whatever way they choose,” he said. “From our point of view we would like something that is less costly to do. Tens of millions of shareholders would be difficult to manage but if but if that is what they want to do we will work with them. Government money helped the bank to survive so it is a matter for them not us.”

With bankers’ bonuses still in the spotlight and a subject for criticism, Sir Philip said he believed the industry was in the process of dealing with this effectively and did not support the 12-month salary cap proposal.

In its latest results RBS revealed a £607 million bonus haul for staff, including £215 million for investment bankers.

He said: “I understand the concerns the public have about bonuses – they were too high. Probably some people are still too highly paid in aspects of investment banking but over time there is an adjustment taking place.

“It is a little bit like closing the stable door after the horse has bolted – bonuses are reducing already. Putting that in where there is a market adjustment is not the right answer.”

Rebuilding trust was cited as something that needs to be paramount, not just for RBS but for all banks, Sir Philip added.

“You have to rebuild trust,” he said. “Banks over a good period of time didn’t have the focus on customers they were supposed to have I think the whole customer service ethos in banking, starting with RBS, needs to improve.

“The most important thing is to give customers the right deal and that is what was lost sight of most in the run-up to the financial crisis.

“The start point is to run the bank effectively so customers get the sort of service they need to have. The first requirement is to make sure we have a safe, sound bank doing the right thing for customers. The only way to fix it is by working hard. We have to deliver better service to customers, ensure the bank is out back on its feet and returned to the private sector.”

RBS has now racked up five years of losses since being bailed out by the taxpayer at the height of the financial crisis. And other recent reputational blows, include its £381 million settlement for attempting to rig interbank lending rates, mis-selling scandals and last year’s IT meltdown that left customers without access to their bank accounts.

Sir Philip pointed to the fact 21 people had been responsible for manipulating Libor rates, but that it was in the past and RBS was now delivering “stability and soundness”.

Further cutbacks were not ruled out following a year which saw a reduction in the number of branches and staff.

“We tend to close a couple of dozen branches a year,” said Sir Philip.

“But we make a commitment not to close the last bank in town. If you live in a town or village and we are the last bank there we will stay open.

“We took 7,000 jobs out of the business last year. There has been a substantial reduction in headcount over the last four years, there is there is continuing pressure and we have to make efficiencies. We are taking £1 billion a year out of our cost base. I haven’t got a disclosable target for future reduction, there will continue to be pressure on productivity from time to time that will lead to job reductions but I expect the biggest chunk of them is in the past rather than the future.”

Reflecting on the state of the bank and the challenges it continues to face Sir Philip concluded: “Because this was the biggest bank failure in the world the challenges taking place here are pretty unparalleled across the world.

“We still have very substantial legacy problems – mis-selling fines, losses on loans made several years ago that are now coming through and some accounting adjustments.

“A lot of problems have emerged from the past. We think 2012 will mark the high water mark of these issues and do not think they will be repeated.”