RBS is first Scots firm to bank £10bn profit

ROYAL Bank of Scotland today became the first Scottish company to smash through the £10 billionayear profit barrier.

Scotland’s biggest company made an underlying profit of £10.29bn, up nine per cent from £9.41bn the year before, which is roughly a quarter of the company’s stock market value.

It also means that Britain’s secondbiggest bank made a profit of £326 for every second of last year – a year in which it played the lead role in the world’s biggest ever banking sector takeover.

Profit at its high street banking operation was up by ten per cent at £2.47bn, while deposit balances rose nine per cent.

The profit haul came despite RBS, which employs more than 100,000 staff worldwide, booking further writedowns linked to the credit crunch.

Overall writedowns on investments hit by last summer’s financial turmoil – sparked by the US subprime mortgage market crisis – rose to £2.5bn, the bank said.

RBS’s credit crunch losses totalled £1.6bn, while writedowns at ABN Amro – the Dutch bank it bought last year as part of a £49bn consortium buyout – were marked down by £900 million.

The bank, which owns a host of operating brands, such as NatWest and Churchill insurance, had warned in December that it expected to write off about £1.25bn. But it noted that the value of its positions in the credit markets had been stable since.

Chief executive Sir Fred Goodwin said: "Whilst the future seems as difficult as ever to predict, it is clear that we enter 2008 with real momentum behind our organic growth, and with our product range, distribution capabilities and customer franchises materially enhanced.

"Coupled with our greater presence in the world’s largest and fastest growing economies, there is much to be done, but a confidence that it will be, to the benefit of our shareholders, our customers and our staff."

RBS said its performance was held back by the turmoil in credit markets – which hit results at its investment banking division – although the bank countered the losses with the sale of businesses such as utility Southern Water last year.

The group’s global banking and markets unit saw profit dip two per cent to £3.69bn.

Despite a worsening economic environment, the bank said a more cautious approach to lending had seen its overall bad debt losses fall one per cent to £1.87bn.

RBS said average loans and advances to customers increased by three per cent, with average mortgage lending up five per cent and average business lending up nine per cent.

At its insurance arm, operating profit dropped to £683m, with the company taking a £274m hit from last summer’s floods.

RBS said it was raising its total dividend for 2007 by ten per cent to 33.2 pence per share.