THE bulk of the job cuts at Royal Bank of Scotland have already been made, the head of the Edinburgh-based institution said yesterday as it unveiled a fourth consecutive year of losses.

Turmoil in Ireland, Greece and in its investment banking arm sent RBS to a £2 billion loss for 2011, widening the £1.1bn deficit in 2010.

RBS, which employs 146,800 people, has already announced the loss of 33,500 jobs as it seeks to reduce its balance sheet and cut costs but chief executive Stephen Hester indicated that the worst could be over. "As far as we can tell, the biggest number of job cuts this company has to make are behind us," he said.

"We cannot be sure of what the economic outlook is for and of course there are continuing job losses that have not actually happened yet but we hope the pace is slowly considerably."

Despite putting on 1.39p or 5% yesterday to close at 28.72p, RBS's share price is still down about 40% in the last year and remains a long way off the average of around 50p a share the Government paid for its stake, making any short-term privatisation unlikely.

Ian Gordon, analyst at Investec, said: "The UK taxpayer is learning to be patient."

Mr Hester said 2008's £45bn taxpayer bailout "wasn't enough to pay for the clean-up" at RBS and the bank was taking losses as it restructures.

After being "spooked by the dangers of the eurozone" last year, RBS deliberately took an extra £1bn of losses to reduce risk.

"It is a slightly Alice in Wonderland world where losses are a good thing," Mr Hester admitted.

The 82% taxpayer-owned group's balance sheet has finally slipped under the £1 trillion mark coming in at £977 billion as it continued to slim its non-core division ahead of expectations.

But many in the City were disappointed that losses in the non-core operation fell less than expected. It made a £4.2bn loss for 2011, after increasing 31% quarter on quarter to £1.3bn as disposals reaped less than expected and impairments rose.

Analysts are also worried about the health of the remaining core business, where earnings fell 18% year-on-year to £6.1bn.

This was largely down to its investment bank, the global banking and markets (GBM) division, where pre-tax profit more than halved to £1.6bn, and was loss making in the final quarter. By comparison, earnings at Barclays' investment bank fell by one-third.

RBS announced revised targets and is now looking for a 12% core return on capital, against the original 15% target and 10.5% for last year.

There were further problems at Ulster Bank, which has suffered from a falling Irish property market. Its loss before tax increased 35% year-on-year to £1bn.

RBS absorbed restructuring losses of £1.1bn and an impairment on sovereign debt, largely Greek, of £1.1bn as well as a £850 million charge to cover compensation for mis-selling payment protection insurance (PPI).

Finance director Bruce van Saun admitted "there could be upside pressure" on its PPI figure.

There were positive signs, however, as RBS's retail bank saw operating profits rise 45% to £2bn.

RBS's corporate arm handed out £93.5bn of new lending to UK businesses in 2011, up 22% on the previous year. This included £40.9bn to smaller companies, a 4% increase on 2010, but although it lent almost as much as its competitors combined, it only met the lower "stretch" target agreed by the Government under the Merlin deal.

Mr Hester said lending weakened in the second half of 2011 as economic growth tailed off.

RBS's insurance business, which has been renamed Direct Line, swung from a loss of £295m to profits of £454m. RBS plans to float it on the stock market in the second half of this year.

Mr van Saun hinted strongly that RBS would use European Central Bank's new bank liquidity programme, known as LTRO, but only to fund its European operations outside the UK.

"The LTRO is offering relatively cheap funding," he said. "There is no stigma around taking them."