In reaction to the annual results, Chancellor George Osborne said RBS is "cleaning up the mess after the biggest bank bailout in history".
Last month chief executive Stephen Hester turned down his bonus of nearly £1m following political pressure.
On a pre-tax basis, last year's loss was £766m compared with £399m in 2010. Last year, the company's share price fell 48% and now stands at around 27 pence.
"We all understand that a company that is making losses at the bottom line tests the patience of those who depend on it," Mister Hester said in the results.
RBS is 82% owned by the state after its £45.5bn bailout in late 2008 at the height of the financial crisis, when it posted the biggest annual loss in UK corporate history.
Pay row
For 2011, RBS said its investment bankers will share a bonus pool of £390m, less than half the amount awarded last year. But while bonuses have halved, basic pay has risen sharply.
The BBC's business editor Robert Peston said that investment bankers account for 12% of RBS' total staff - of 146,800 - and their bonuses were £5,347 on average.
He tweeted: "The bonus element on average investment banking pay of £144,000 at RBS was £22,941, down from £50,114. So average basic pay up 29%."
"I understand people's anger and anxiety about inequalities in pay at a time when the economy is weak and many people are finding things tough," Mr Hester said.
"RBS alone cannot fix these wider issues if we are to achieve what is asked of us commercially. But we have led the way in changing how we pay our people.
The chancellor supported the bank's action on pay.
"We have made clear that RBS should be a backmarker in the industry when it comes to pay, so it's right that bonuses at the investment bank are less than half what they were last year and less than a third of what they were in 2009," said Mr Osborne.
RBS reports several figures for profit and losses. Some include one off charges and other items.
Two big costs contributed to last year's loss.
RBS had to set aside £850m to compensate people who bought payment protection insurance they didn't need.
It also had to take a loss of £1.1bn on its investments on Greek government debt amid the ongoing eurozone debt crisis.
Without those charges and adjustments for bad debt, the so-called core bank, which includes NatWest, made a profit of £6bn - which was down almost 18% on 2010.
RBS has been selling off its "non-core assets" to revive its profitability.
The balance sheet has been reduced by more than £700bn from the peak of the crisis, it said.
The bank also said it had given more than 40 pence in every £1 lent to UK small and medium-sized businesses, which is more than was demanded by government targets, and provided 4,000 business loans each week on average.
Mr Hester was appointed chief executive at the end of 2008 to replace Fred Goodwin, who was recently stripped of his knighthood over the collapse of the bank. RBS' chairman, Sir Philip Hampton, also gave up £1.4m worth of shares he was due next month.
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