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RBS in £1.25bn credit crunch hit RBS in £1.25bn credit crunch hit
(20 minutes later)
Royal Bank of Scotland (RBS) has warned it expects to write-off about £1.25bn because of its exposure to bad debts in the US sub-prime loans market. Royal Bank of Scotland (RBS) has warned it expects to write off about £1.25bn because of its exposure to bad debts in the US sub-prime loans market.
About £300m of the loss relates to the exposure to the US of Dutch bank ABN Amro, which it bought in October.About £300m of the loss relates to the exposure to the US of Dutch bank ABN Amro, which it bought in October.
But the hit is less than many had expected and RBS said its 2007 profits would beat analysts' forecasts.But the hit is less than many had expected and RBS said its 2007 profits would beat analysts' forecasts.
Rising mortgage defaults and falling US house prices have meant loans bought by banks are worth less than thought.Rising mortgage defaults and falling US house prices have meant loans bought by banks are worth less than thought.
RBS added that its integration with ABN since its 71bn-euro ($98.5bn; £49bn) takeover was "progressing well". Deposits surge
RBS added that its integration with ABN since its 71bn-euro ($98.5bn; £49bn) takeover was "progressing well" and that the benefits were set to be "somewhat greater than anticipated".
The deal, completed in October after a bidding war with Barclays, was Europe's biggest banking takeover to date.The deal, completed in October after a bidding war with Barclays, was Europe's biggest banking takeover to date.
RBS is the UK's second largest bank RBS also revealed that deposits had grown rapidly in the second half of the year as savers abandoned the stricken Northern Rock bank and looked to put their money elsewhere.
In a trading update, the UK's second largest bank said that it had been able to offset a further £250m of losses amid the credit turmoil by drawing on cash reserves.
This was much cheaper than being forced to borrow from the more expensive wholesale credit market.
And it said that while growth at its investment bank arm had slowed, it was set to report good profit growth for 2007.