RBS shares soar 11% as NatWest integration exceeds expectations

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Royal Bank of Scotland said yesterday it was looking to expand internationally after delivering the first concrete evidence that its integration of National Westminster Bank was on track following the takeover in March.

Royal Bank of Scotland said yesterday it was looking to expand internationally after delivering the first concrete evidence that its integration of National Westminster Bank was on track following the takeover in March.

Sir George Mathewson, deputy chairman, said the group will initially be looking to use its strong ties with Spain's BSCH and other European allies to develop its corporate business in Europe, while looking to launch specific retail product initiatives in individual countries on its own.

He said the NatWest deal had widened the bank's options for growth in the UK and mainland Europe, while other UK banks were looking increasingly boxed-in strategically. In the US, Citizens, its New England bank, could either acquire or merge with another US bank.

Under the detailed integration plan presented to the City, RBS had said it expected to take three years to reach the maximum expected savings of £1.34bn a year and revenue growth of £595m a year.

However, Fred Goodwin, the chief executive, said the bank expected to complete the more intensive part of the integration process far sooner. "The possibility [of a big acquisition] starts to come on the radar screen sooner than three years," he said, although he cautioned: "We are not acquisition-bent for the sake of it." He said he would not rule out a bid for a UK mortgage bank.

Profits for the half to 30 June rose by a bigger-than-expected 23 per cent to £2bn before tax and takeover-related costs. With these included, profits before tax were up by 11 per cent to £1.5bn.

The figures, which for comparison were presented as if the takeover had been effective on 1 January, were ahead of City forecasts. The shares rose 118p, more than 11 per cent, to 1,170p, taking them close to their pre-bid level of £12.

The bank has found £146m of the £260m in savings to be achieved by this year-end. Of revenue growth initiatives, £46m has been implemented against a first-year target of £120m. In the first half, 7,500 staff have left the business. The three-year target is 18,000.

There has been little sign of NatWest customers defecting to rivals. RBS has halted NatWest's branch closure programme, abolished cash-machine and overdraft charges and launched an advertising campaign subtly knocking Barclays' "big bank" approach.

Lothbury, NatWest's prestige corporate headquarters in London, is empty and up for sale.

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