Royal Bank of Scotland chief executive Ross McEwan has said the bank is now a "compelling investment proposition" and may finally resume dividends to shareholders next year, despite unveiling a £3.5billion loss seven years after its rescue.

But an upbeat results presentation was clouded by the revelation that RBS is being investigated in Germany and the US for alleged aiding and abetting of tax evasion by clients of the Coutts private bank in Switzerland.

After admitting he has abandoned plans to grow the loss-making investment bank and will instead slash it by two-thirds, Mr McEwan said RBS would at last be "much lower risk" and would commit to "attractive cash distributions" as it returned to profit.

RBS had been expected to return to profit last year but was tipped into a £3.5bn loss by a £4bn writedown on the value of its part-floated US bank Citizens. The sale of the remainder of the business during the currrent year has triggered the writedown now rather than next year as analysts had expected.

The £9.3bn of exceptional items included £2.2bn for conduct and litigation costs, of which £1.16bn were added in the final quarter.

The quarter also saw a huge £643m loss in the investment bank, pushing it to a loss of £892m for the year, despite cutting costs by 22 per cent. "Those returns are clearly not acceptable," Mr McEwan said.

The loss improved on the previous year's £9bn deficit but it takes cumulative losses since 2008 to £49.5bn.

The bank yesterday announced the disposal to Mizuho Bank of a £5bn North American book of assets, around 20 per cent of its new target for shedding £25bn of assets this year and around £70bn in due course, shrinking RBS corporate and institutional banking by two-thirds.

Mr McEwan said: "Let me be quite clear this marks the end of the standalone global investment bank model for RBS." He said the slimdown would "take it back to core customer and product strengths", with operations in 25 countries wound down, and "substantial" but as yet unquantifiable job losses overseas.

But he said RBS would still offer "a complete service to large UK and western European businesses including support in US and Asian markets".

Finance director Ewan Stevenson said this would "pave the way for distributions to the government and other shareholders" of surplus capital, though there would be "major bumps in the road specifically regarding conduct and litigation".

The first bump emerged yesterday as RBS was dragged into the Swiss private banking scandal that has engulfed HSBC. Mr McEwan said: "Coutts is currently cooperating with the US and German tax authorities on these issues, we want to be upfront."

On the controversial appointment of former chief regulator Sir Howard Davies as the bank's next £750,000 a year chairman, Mr McEwan insisted that he was "delighted we have secured such a high-calibre candidate".

Sir Howard chaired the Financial Services Authority from its creation by the Labour government in 1997 to 2003. In 2011 he quit as director of the London School of Economics after damaging revelations about its links to the Gaddafi regime in Libya.

RBS said: "Howard has an extraordinary breadth of experience across the UK financial services sector, having held the roles of Chairman of the Financial Services Authority, Deputy Governor of the Bank of England, Director General of the Confederation of British Industry and CEO of the Audit Commission." He currently chairs Phoenix Group and the UK Airports Commission and is on the board at Prudential and Morgan Stanley, and will succeed Sir Philip Hampton at the end of August.

The bank's bonus pool has reduced this year by 16 per cent to £483m. Questioned on his own bonus and whether investment bankers were being paid less, Mr McEwan said he had again foregone a £1m role-based incentive so there could be "no distractions" from the key issues, while pay per investment banker had fallen by 11per cent. But he went on: "We do need to make sure we have a competitive pay structure for our people so we can rebuild this bank."

One of the group's key performance measures however showed the 'great place to work' score fall from 78per cent in 2013 to 72per cent last year.

Sir Philip said it had been a year of significant progress but went on: "Looking back, however, we must acknowledge that we did not fully recognise the scale of the challenge that awaited us in 2009....(we) did not anticipate the more than £9bn of regulatory fines and customer redress we have borne so far as we paid, and will continue to pay, the price for our past conduct failings. These conduct issues have delayed the re-build of our capital and directly reduced shareholder value. They have also caused continuing reputational damage."