RBS: Your bank just lost £5bn of your money

State-owned RBS' pre-tax losses jumped from £766 million in 2011 to £5.17 billion in 2012, the bank has announced.

Its annual results have plunged its future into doubt, as chief executive Stephen Hester was forced to admit the government may not get its money back when the time comes to sell the bank.

An accounting charge of £4.6 billion is largely to blame for the setback, which overshadows an improved operating profit of £3.4 billion.

It leaves RBS – 81% of which is owned by the government – facing huge difficulties as it looks to allow taxpayers to start to sell back their stake before the 2015 election.

Hester admitted 2012 had been a "chastening" year for the bank, which was fined £381 million for its part in the Libor scandal and has also had to put aside more cash over the mis-selling of interest rate swaps and payment protection insurance.

"Along with the rest of the banking industry we faced significant reputational challenges as we worked with regulators to put right past mistakes," he said.

"We are determined to overcome the cultural and reputational baggage of pre-crisis times with the same focus we have applied to the financial clean-up from that era."

RBS also revealed today it plans to sell a major part of its US banking business, Citizens, in around two years.

The move was welcomed by George Osborne, who said he had always wanted to see the bank concentrating on serving British customers.

"The government's strategy is for RBS be a stronger and safer bank, which in time can be returned to full private ownership," the chancellor said.

"I have been very clear that I want to see RBS as a British-based bank, focused on serving British businesses and consumers, with a smaller international investment bank to support that activity rather than to rival it.

"I welcome RBS' announcement today to accelerate that strategy."