Britain's state-rescued Royal Bank of Scotland on Friday posted its eighth annual loss in a row although the latest result came in 43 percent smaller at around £2.0 billion.

The loss after tax stood at £1.979 billion ($2.771 billion, 2.518 billion euros) last year compared with a net loss of £3.47 billion in 2014, helped by the sale of US unit Citizens, RBS said in an earnings statement.

Investors did not take kindly to the results however, with RBS shares slumping more than 9.0 percent in morning deals.

"RBS today reported its eighth annual loss since it was bailed out by the UK taxpayer," said Graham Spooner, investment research analyst at The Share Centre.

RBS, bailed out at the height of the financial crisis in 2008, continued to be hit by hefty costs linked to legal action it is facing over US mortgage-backed securities and to compensation due for mis-selling of an insurance product.

Total litigation and conduct costs increased to almost £3.57 billion last year, while the bank warned of possible further financial hits.

"We continue to deal with a range of uncertainties," RBS said in its outlook, noting that "substantial incremental provisions" may be added to the group's balance sheet in 2016.

It pointed also to uncertainties surrounding the June referendum on Britain's EU membership.

RBS is around 73-percent owned by the British government after the vast state-rescue after the Edinburgh-based lender was saved with £45.5 billion of taxpayers' cash at the height of the global financial crisis in the world's biggest banking bailout.
The group, under the leadership of chief executive Ross McEwan, launched a massive overhaul one year ago that slashed the bank's investment banking activities and axed thousands of jobs.

"The group is set to shift its business towards retail and commercial banking," said Spooner.

"The CEO’s restructuring plans will shrink the group further, through to 2020. The share price has continued to fall over the last twelve months and is now close to a three-year low."

In morning deals, RBS was down 9.3 percent at 221.4 pence on London's benchmark FTSE 100 index, which was up 1.2 percent to 6,086.74 points overall.

In common with many other major banks, RBS has faced huge fines and compensation demands for its alleged role in the manipulation of foreign exchange market and Libor interest rates.

It has also had to set aside billions of pounds, along with other British lenders, to compensate customers mis-sold payment protection insurance on loans.