RBS makes a record £8.1bn but rules out big acquisitions

Royal Bank of Scotland ruled out big acquisitions in the United States and Europe, as well as returning cash to investors through share buy-backs, as profits climbed above the £8bn mark for the first time.

Royal Bank of Scotland ruled out big acquisitions in the United States and Europe, as well as returning cash to investors through share buy-backs, as profits climbed above the £8bn mark for the first time.

Sir Fred Goodwin, the chief executive of Britain's second-largest bank, said RBS would focus on making its $10.5bn (£5.5bn) acquisition of Charter One, its biggest US purchase, work. "A big acquisition is not featuring in our thinking at the moment. In the near term the focus is on completing the one (acquisition) we have done and taking advantage of the organic growth opportunity." He said the integration of the Midwest lender, which bolsters RBS's Citizens business, was on track.

Annual pre-tax profits excluding goodwill and integration costs climbed 15 per cent to £8.1bn, at the top end of analysts' expectations. Pre-tax profits were up 14 per cent to £6.9bn. Income rose 18 per cent to £22.8bn, boosted by takeovers and growth across the group's businesses, including NatWest and the insurer Churchill.

Sir Fred hinted at further small acquisitions in the US and Europe and added that the group was also looking for joint ventures in some product areas in China. He also indicated that the bank's capital position meant share buy-backs were unlikely this year.

RBS was the third big UK bank to report record profits, after Barclays and Standard Chartered. By mid-March the banking industry will have totted up record profits of about £30bn, which could spark fresh calls for windfall taxes, but Sir George Mathewson, RBS's chairman, dismissed the idea. He said, "I would find it very difficult to believe that this government would do such a thing. A windfall tax would be so damaging to the stock market and to the whole credibility of the UK to invest."

RBS said it paid £2.2bn in taxes last year. It also said more than 100,000 staff received a 10 per cent profit share worth an average of £2,100 a person. Moreover, the group poured £1.1bn into its pension fund. Countering criticism of "rip-off banks," Sir Fred noted that RBS derived less than 10 per cent of its profits from lending to consumers.

The bank said its credit quality was strong and that its bad-debt charge rose only 1 per cent to £1.5bn. There was, however, a rise in credit card provisions.