By Margot Patrick 

LONDON-- Royal Bank of Scotland Group PLC on Thursday said it would spend billions of pounds to dismantle its global investment bank--including pulling back sharply in the U.S.--as it announced its seventh annual loss in a row.

RBS shares sank 5% after Chief Executive Ross McEwan said radical measures to make the bank smaller and safer will mean substantially higher restructuring charges this year than 2014's GBP1.26 billion ($1.96 billion). Analysts said that could delay any dividend payments by the 80% state-owned bank until 2017 or beyond.

Mr. McEwan's plans include exiting corporate and investment banking operations in around two dozen locations including Hong Kong and Australia. The bank will retain only London, Stamford, Conn., and Singapore for full-service sales and trading, which will mainly serve western European companies and financial firms.

"This is a plan for a smaller, more focused, but ultimately more valuable bank with the vast majority of its assets in the U.K., and for RBS marks the end of the stand-alone global investment-bank model," Mr. McEwan said.

RBS fell into state support in 2008 as the financial crisis wiped out its slim capital buffer and exposed how far it had overreached in acquiring Dutch rival ABN Amro NV the year before. Since then, it has been a political football, with its strategy in part steered by the government. U.K. Chancellor of the Exchequer George Osborne on Thursday said his priorities for RBS were for it to be "a British bank focused on the British economy, with lower bonuses and with a plan to get the taxpayers' money back."

Analysts said the government could be waiting years yet to see the return of the GBP46 billion invested in the bank. At around 384 pence, the shares are well below the roughly 455 pence price needed for the government to break even.

"These changes will bring higher restructuring costs and negative operational gearing as revenues fall faster than costs but ... were required to bring overall strategy into line with current operating and regulatory realities," Jason Napier, an analyst at Deutsche Bank wrote in a note.

Adding to the gloom, RBS's 2014 results Thursday were less than stellar. The bank posted a GBP3.47 billion net loss for 2014, narrower than 2013's GBP9 billion net loss, but weighed down by a host of charges. Operating profit was GBP3.5 billion, against a GBP7.5 billion operating loss in 2013. The charges included a GBP4 billion write-down on the value of part-owned U.S. unit Citizens Financial Group and GBP2.2 billion in conduct and litigation charges.

RBS sold a 29% stake in Citizens in an initial public offering last year and plans to fully exit the bank by the end of 2016.

Mr. McEwan warned that more charges over past misconduct are likely, and said it has "taken far too long, longer than anyone expected, to root out all the past problems, practices and related fines."

He said three employees had been let go in the past 10 days in relation to a global probe over banks' activities in foreign-exchange markets, and that two more were suspended. RBS also disclosed that German prosecutors were investigating its Coutts & Co. Ltd. private bank in Switzerland for alleged facilitation of tax evasion by bank clients.

Meanwhile, slimming down investment banking will inevitably mean fewer jobs, RBS executives said.

Chief Financial Officer Ewen Stevenson said total job cuts were hard to predict, but that more than half of the roughly 2,000 investment-banking jobs in Stamford will go.

The bank's building there, with a 95,000 square foot trading floor, "is probably bigger than we need, so we'll be looking at that in due course, " Mr. Stevenson said.

Write to Margot Patrick at margot.patrick@wsj.com

Corrections & Amplifications

RBS said it operates in 38 countries, would fully exit 21 and bring the number of countries it operates in down to 17. Earlier versions of this article incorrectly said RBS operates in 25 countries, incorrectly gave the number of countries it would exit as 10 and 25, and incorrectly said it would aim to bring the number of countries it operates in down to 15 or less, and 13. The figures were also incorrect in an earlier version of this correction. (Feb. 26, 2015)

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