RBS finds £40m more savings in NatWest deal

Royal Bank of Scotland, which last month completed a hostile £20bn-plus takeover of National Westminster Bank, said yesterday it had identified £40m extra cost savings and vowed to lift group profits as high as £5bn.

The comments came as the Scottish bank outlined progress in integrating NatWest in the 30 days since it beat off Bank of Scotland to acquire the clearer. The group said it had met all its main objectives, including key appointments, realigning internal control and finalising a three-year plan for all units.

Fred Goodwin, RBS chief executive, said the bank had increased its £1.18bn estimate for total cost savings from the merger by £40m. The figures are on an annual basis by the end of three years. But he said the one-off restructuring charge would also be higher, bringing the total to about £1.4bn. "We said it would cost a pound per pound. But there were some property issues in London and some reasonably expensive people to get rid of, which have driven this up a shade higher."

Mr Goodwin said revenue benefits were also "materially higher" at £515m, compared to the originally-projected £390m. He added that the group would cut 9,000 jobs by the end of the year, half of the total cuts that will result from the merger.

Hugh Pye, an analyst at Robert Fleming, said: "They seem to have got through the first 30 days without too many surprises... I think if they were going to mess things up, they would have done it by now."

Sir George Mathewson, RBS executive deputy chairman, said: "We aspire to overtake Lloyds TSB as soon as possible, and eventually match HSBC." In 1999 HSBC had a profit before tax of £4.9bn. Lloyds TSB made £3.8bn, while the combined profits of RBS-Natwest were £3.2bn. Barclays lagged with £2.9bn.

Mr Goodwin repeated the group's pledge that there would be no branch closures as a result of the deal, although he did not rule out making closures in the future.

Referring to Barclays' recent decision to close 171 branches, Mr Goodwin said: "Closing branches simply for fun or to drive cost targets doesn't make sense. I find it equally difficult to understand how branch closures have to come along hundreds at a time."

RBS-NatWest has a total network of 2,350 branches, including 140 outlets which the NatWest management had planned to close.