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Royal Bank of Scotland (RBS) has reported a loss of £1.98bn for 2015, its eighth year of annual losses.

RBS shares fell 7% to 226.6p and remain well below the price the government paid for an 84% stake to save the bank in 2008.

The bank, which came close to collapse at the height of the financial crisis, is still setting aside billions to cover past mistakes and fines.

Even after all these costs are stripped out, profits are still falling.

The annual loss is partly due to a £3.6bn charge to cover conduct and litigation costs, many of them in the US.

RBS also set aside another £2.9bn for restructuring, as it withdraws from 25 of the 38 countries it still operates in.

It added that it did not expect to pay a dividend to shareholders until at least next year, saying: "We now consider it more likely that capital distributions will resume later than Q1 2017."

'Work to do'

Underlying profits at RBS, which is still 73% government-owned, dropped to £4.4bn, from £6bn a year earlier.

RBS said the fall in these profits was largely due to lower income from interest payments.

Image copyright Getty Images Image caption RBS chief executive Ross McEwan: "Low interest rates do hurt banks"

Chief executive Ross McEwan told the BBC's Today programme: "Low interest rates do hurt banks and it's very clear interest rates will stay lower for much longer now.

"The UK and Republic of Ireland have quite strong economies... but you are seeing a slowing down in a number of economies around the world and low interest rates do hurt banks."

"We have still got a number of conduct and litigation issues - the largest of those is in the US - which we have to settle. Unfortunately that is not in our gift time-wise.

"We need to sell off Williams and Glynn which is the branch network we are committed to selling off by 2017, and we need to show a track record that we have got a very good bank underneath all these headline noises."

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Analysis: Andy Verity, economics correspondent

Last June, the Chancellor George Osborne told an audience at his annual Mansion House speech he would start selling the stake in RBS we purchased for £45bn in the crisis - and do so without delay.

"It's the right thing to do for British businesses and British taxpayers. Yes, we may get a lower price than that was paid for it - but we will get the best price possible. For the longer we wait, the higher the price the whole economy will pay," he said.

That is certainly true since then. That night the shares were worth £3.54 each. Today, after RBS (known best to most as the owner of NatWest) unveiled a £2bn net loss, the shares at one point dropped to £2.22. That's well under half the £5.02p we (the taxpayers) paid for them.

Mr Osborne's desire to sell without delay was backed by the governor of the Bank of England Mark Carney and an independent report by the investment bank Rothschild. A stake worth £2.1bn was sold in August.

But it's one thing to ask the taxpayer to lose a third of their much troubled investment. It's another to ask them to write off more than half - which would translate to a loss of about £25bn on what the taxpayer paid.

Some in the City are now whispering - perhaps RBS would be worth more to us all if it were broken up and sold bit by bit.

'Disappointed'

Among the conduct and litigation issues RBS has put aside £600m to pay claims for the mis-selling of payment protection insurance in the UK.

RBS also said it had cut costs by £983m last year, and boosted net mortgage lending by 10% on a year ago to £9.3bn.

Michael Hewson, chief market analyst at CMC Markets, said: "Every year we hope that the time has come for the bank to turn a corner and every year we return disappointed.

"CEO Ross McEwan must be wishing he had never taken on the task of turning the bank around when he took over the reins in August 2013."

Pay package

The money RBS pays out in bonuses to staff was reduced by 11% to £373m for 2015.

Mr McEwan's salary and incentive pay has increased from 2014, when he received £1.8m.

In 2015, on top of Mr McEwan's £1m salary he was awarded a £1m "role-based" incentive, but has personally donated the sum to charity.

Mr McEwan also said that in 2016 he would give half of this role-based pay to charity.

However, he has also been given £1.347m as part of a three-year performance related award, and £350,000 in pension allowances.

Share sale

Turmoil on the stock markets has meant that the government's plans to sell off more of its stake in RBS are likely to be delayed.

In January this year, it suspended the sale of its final stake in Lloyds Banking Group. Taxpayers own just under 10% of Lloyds.

In August, the government managed to sell a 5.4% stake in RBS at 330p a share, raising £2.1bn.

The price was one third below the 500p a share paid by the government when it took its stake in the bank during the financial crisis, and represented a loss of about £1.07bn.

Mr Hewson said: "It turns out the decision by the UK government to pare down... its stake in the bank in the middle of last year doesn't look such a bad decision after all, amidst a chorus of criticism that it was sold off too cheaply. That 330p price seems a long way away now.

"Unless there is some clear evidence that this continued drip feeding of negative news shows signs of abating, it is going to be very difficult to see a rebound in the share price, as shown by today's sharp falls."