RBS unveil smaller than expected losses

RBS (RBS) said it would reap more benefits from its purchase of parts of ABN AMRO and beat profit forecasts after unveiling a smaller than expected $2.5 billion (£1.23 billion) writedown due to the credit squeeze.

Approximately £300 million of the loss relates to the exposure to the US of Dutch bank ABN Amro, which it purchased in October.

Shares in the bank increased more than 8% after it said 2007 profit will reach £10 billion and its reassurance gave other UK banks a much-needed boost. Shares in the bank have been hit hard this year and have lost over 30% of their value.

Fred Goodwin, the bank’s chief executive, said that the write-downs were based on what RBS thought its total losses would be. He added that there would only be further losses if the situation ‘got materially worse from where it is now’.

Mr Goodwin continued that although there was much gloom about the economy, corporate customers remained busy and had healthy balance sheets and the economy ‘wasn’t in bad shape.

RBS led a consortium that bought ABN Amro, the Dutch bank, for 71 billion euros, the world’s biggest bank takeover. RBS will get ABN’s wholesale business and Asian operations. Mr Goodwin said that the acquisition should deliver slightly higher earnings accretion and return on investment than previously expected. A bigger presence in fast-growing Asian markets and some steady businesses such as ABN’s transaction services also left RBS more resilient to an economic slowdown.

RBS also said that deposits had increased significantly in the latter half of 2007 as savers abandoned crisis-torn Northern Rock and looked to put their money elsewhere.

Analyst Keith Bowman of Hargreaves Lansdown Stockbrokers said that RBS had answered concerns about its position ‘with some style’

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