RBS expects results in line with expectations

24-08-2006

The Royal Bank of Scotland (RBS) group has announced that it expects its first half results to be in line with expectations following good income growth during the first part of the year.

In a trading update, the UK's second largest bank said that a strong performance by its corporate markets unit, especially its global banking and markets operation, had helped achieve the boost.

Income growth within the bank's retail markets unit reflected a continuation of a trend which had seen UK consumers move away from unsecured lending and embrace savings and investment products, RBS said.

The Edinburgh-based bank said that its insurance unit had also increased its income despite competitive trading conditions.

RBS said that its overall credit metrics were expected to show a small improvement for the first six months of 2006, with the level of bad debts increasing at a lower rate than the growth in loans and advances made by the bank.

The company's net interest margin, the difference between the interest that the bank receives and pays on loans and deposits, is expected to be lower, RBS said.

The margin has been hit by changes to the type of products the bank sells and a shrinking gap between short and long-term interest rates in the United States (US), known as a flattening yield curve. RBS' US arm Citizens, will see its earnings constrained as a result, the company said, while stressing that the subsidiary had achieved a positive growth in its business activities.

RBS added that while the group had continued to make investments to achieve future growth, the company continued to benefit from adisciplined approach to expense management.

The bank revealed that it had also commended a £1 billion share buy-back programme during the first half of 2006.

Commenting ahead of the release of full half-year results on August 4th, RBS group chief executive Sir Fred Goodwin said: "2006 is progressing well, and we are confident that our interim results will clearly demonstrate the inherent strength of our business model, the benefits of our diversified business activities and the range of options available to us for future organic growth."



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