Royal Bank of Scotland first half profits expected to reflect markets

ROYAL Bank of Scotland Group Plc's first-half profit are expected to rise in line with market expectations.

First Active's mortgage book will bring down interest margins at Britain's second-biggest bank, however.

RBOS, which owns Ulster Bank and First Active in Ireland, benefited from a lending boom and near- record corporate bond activity amid low interest rates.

Yesterday RBOS issued a very positive trading statement in a flow of positive trading updates from rivals HSBC and Barclays in the past two weeks.

"As previously indicated, the group's net interest margin is expected to be a few basis points lower than last year due to the inclusion of First Active, and the business-mix impact of particularly strong growth in mortgages and rental assets. Excluding this, margins have remained stable," the company said.

Analysts are forecasting that Royal Bank will deliver annual pre-tax profits of around £7.85 billion before goodwill and the integration of acquisitions, up from £7.15bn last year.

RBOS chief executive Fred Goodwin said: "Good momentum continues across each of our businesses and we are on track to deliver strong organic growth in income while continuing to improve efficiency."

Royal Bank said its dealing profits had a "good underlying momentum". The bank said there had been an increase in bad debt provisions for personal lending but bad debt charges as a percentage of total loans were improving. Credit quality for corporate loans was also stronger, it added.

Royal Bank announced eight acquisitions, including First Active, last year and the bank said yesterday that all were performing well, with integration on track.

The company said last month it would buy Charter One Financial for $10.5bn, its biggest acquisition in the US.

The bank where former AIB chairman Peter Sutherland is an independent director did not provide any specific figures in the statement, intended to help analysts forecast first-half earnings due on August 3.