New RBS chief Ross McEwan to receive no bonus this year or next 2 August 2013 Last updated at 12:14 The incoming chief executive of Royal Bank of Scotland will take no bonus for his work in the role this year or 2014. Ross McEwan, 56, who is currently head of the bank's retail arm, will take up the position in October with a £1m salary. The announcement came as RBS reported pre-tax profits of £1.4bn in the first half of the year. This was up from a loss of £1.7bn the year before. However, the bank's shares took a hit as investors voiced their disappointment there had not been further improvements. Shares fell over 5% in early morning trading before recovering slightly. Safe and strong RBS chairman Sir Philip Hampton said running the bank was among the most challenging jobs in the business world. "Five years on from its rescue, RBS is now a safe and strong bank," he said. McEwan's remuneration scheme implicitly confirms what the chancellor said in his annual speech to the City at the Mansion House, which is that the privatisation of taxpayers' 81% stake in RBS is years away Our focus is now on building a really good bank for our customers and shareholders, returning the bank to private ownership, and playing our full part in supporting the UK economy. Chancellor George Osborne welcomed the appointment, saying Mr McEwan had impressed with his vision of RBS as a strong, UK-centred corporate bank. The bank said Mr McEwan, who joined RBS from Commonwealth Bank of Australia in September 2012, would not take a bonus for 2014 or for the remainder of 2013. Instead of a pension he is set to receive a cash sum each year equivalent to 35% of his salary. His £1m pay packet marks a 16.7% drop from the £1.2m earned by the bank's current chief executive, Stephen Hester. Lloyds contrast In the first half of the year the bank reported a group operating profit of £1.7bn, up 5% from the first half of 2012. Who is Ross McEwan? 56-year-old New Zealander Joined RBS in September 2012 as chief executive for UK Retail Previously group executive for Retail Banking Services at Commonwealth Bank of Australia Married with two children But in what RBS calls its core - the operations that it wants to keep and expand - profits fell from £4.5bn to £3.8bn. The bank was also forced to set aside another £185m pounds to compensate customers for the mis-selling of payment protection insurance, taking the bill for mis-selling to £2.4bn. The RBS profit numbers come a day after Lloyds Banking Group announced it had made £2.1bn ($3.2bn) in the six months to the end of June, compared with a loss of £456m for the same period last year. BBC business editor Robert Peston said the RBS numbers showed the bank was much stronger than it was a few years ago, particularly in terms of capital ratios, a key measure of the bank's strength. "However, the profit performance isn't as impressive if you strip out funny accounting niceties," he said. Certainly a little bit of growth this year but that is the contrast between RBS and Lloyds - yesterday we saw significant profits growth at Lloyds but we are not yet seeing that at RBS. There is no doubt its retail banking operations in the UK can be a powerhouse again, but the row with the Treasury over whether the investment bank should be expanded or slimmed down has detracted fairly significantly from its operating performance. Lacklustre figures Retail banking will be RBS's future focus, says James Bevan from CCLA Investment Management Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said RBS' first half figures were "lacklustre" and unlikely to alter investor perception of the stock as one to avoid. "The general view is one of impatience in awaiting the RBS full recovery story when there are perceived to be better opportunities elsewhere in the sector," he said. Announcing his last set of figures before stepping down as chief executive, Stephen Hester was more positive, saying RBS's journey from 'bust bank' to 'normal bank' was largely done. "But no small task remains - to harness the energies and strengths that have driven the bank's recovery, and to take RBS towards the target of being a 'really good bank' for customers, shareholders and society as a whole," he added. There has been speculation that the success of Lloyds could soon pave the way for the government to sell its 39% stake in that bank. However, analysts said the results from RBS, which is 81%-owned by the UK taxpayer, told a different story. Joe Rundle, head of trading at ETX Capital, called it "a particularly weak performance." "Unlike its peer Lloyds Banking Group, there's little to suggest the government is comfortable with selling down its stake in the bank," he said.