RBS expects profits ahead in 2006

Britain's second biggest bank Royal Bank of Scotland said its 2006 profits should be "slightly ahead" of analysts' expectations due to strong organic income growth and a strong performance by its corporate markets unit.

The Edinburgh-based lender said it should beat the consensus forecast for profit before tax and one-off items, which stood at £9.158 billion pounds,up 11 per cent from £8.25 billion in 2005.

RBS said 2006 profit growth would also be underpinned by an improvement in efficiency, strong credit metrics and stable returns, while margin trends were in line with previous guidance.

The bank said its overall credit metrics are expected to have improved, with total impairment losses representing a slightly lower proportion of all loans and advances. Within its retail markets unit growth in bad debts on unsecured loans "continues to moderate".

Retail Markets achieved good growth in income and saw stronger mortgage lending in the second half, which offset weaker demand for consumer credit, it said.

RBS's profits jumped 23 per cent in the first six months of this year as its corporate markets unit grew strongly and it kept a tight control on costs.