Soaring profits top £5bn at RBS

BAD DEBT provisions at Royal Bank of Scotland rose 54% to almost £1bn last year. But the bank still delivered underlying profits of more than £5bn, up 32%, due to strong growth in all its businesses and savings from the acquisition of NatWest in 2000.

Since Enron collapsed, there has been concern in the City about Royal Bank's exposure to the US energy trader. The bank said its provisions included some specific situations but would not identify them. 'We are not going to discuss this,' said chief executive Fred Goodwin. 'We're at the glass-half-full stage of the cycle. We are travelling forward and making good progress but we are very vigilant.'

He was also coy about speculation that RBS is keen to acquire Allied Irish Banks, which suffered a £485m loss at the hands of rogue trader John Rusnak. 'All I can say is that we don't feel under pressure to do a deal at the moment,' he said.

Savings from the NatWest deal will be £300m higher than expected, at £2bn a year from 2003.

Total income rose 18% to £14.6bn. Lending grew strongly and the company made lots of money from credit card borrowings and processing and from money transmission.

Expenses, excluding the cost of the NatWest acquisition, grew by only 3% to £6.8bn, although integration expenses associated with bringing NatWest into the fold almost doubled to £875m.

Strong growth was recorded across the group. Corporate banking profits rose by 10% to £3bn and in retail banking, which includes small businesses, profits were up 14% to £2.8bn.

Chairman Sir George Mathewson took a sideswipe at new entrants into the market, saying: 'At this stage in the economic cycle, it is vital for the wellbeing of the economy that small businesses are supported on individual merit and not cherry-picked based on a prejudice about a particular sector or customer grouping'.

Direct Line raised profits 30% to £261m, while US bank Citizens lifted profits 44% to £501m. The dividend is 15% ahead at 38p a share.

RBS shares initially dived 51p to 1683p but later rallied to end off 2p at 1732p.