RBS unveils £10.3bn profits

Royal Bank of Scotland today unveiled profits of £10.3 billion despite more losses from the credit crunch.

The UK's second biggest bank's underlying profits for 2007 were 9 per cent higher than the previous year, in line with City forecasts.

But total write-downs on investments hit by last summer's financial turmoil and the crisis in the US sub-prime mortgage market rose to £2.5bn, the bank said.

RBS's credit crunch losses totalled £1.6bn, while write-downs at ABN Amro - the Dutch bank it bought last year - were £900m.

UK business banking also lifted operating profits 11 per cent to almost £2bn, offsetting the decline in earnings from investment banking.

Its Citizens banking business - exposed to the faltering US economy - also saw profits fall and bad debt charges more than double, reflecting the impact of a softer housing market and a weaker dollar.

Chief executive Sir Fred Goodwin said prospects for 2008 were "difficult as ever to predict" but added that there was good momentum behind the enlarged bank following the acquisition of ABN Amro.

RBS beat off a rival bid from Barclays to win the battle for ABN Amro last October with a €71bn (£54.1bn) bid and said today it has identified a further €1.6bn (£1.2bn) in cost savings from the deal over the next three years.

There have been concerns in the City that RBS overpaid for the Dutch bank and questions over the bank's capital position following its investment losses.

But the bank added today that its capital remained within target ranges and also cheered investors with a 10 per cent hike in the annual dividend.