Royal Bank of Scotland on Thursday narrowly beat analysts' expectations with a 14% rise in 2006 underlying profit, and said it would raise its full-year dividend by 25%.
Europe's second biggest bank said 2006 operating profit reached a record 9.41 billion pounds ($18.4 billion), up from 8.25 billion pounds in 2005 and ahead of an average forecast of 9.34 billion pounds from a Reuters Estimates poll.
RBS raised its 2006 full year dividend to 90.6%, up by a quarter for the second successive year.
The bank said income grew by 10% to 28 billion pounds, while costs rose 8%, improving the ratio of costs to income to 42.1% from 42.4%.
The net interest margin -- the difference between the interest charged to borrowers and paid to savers and a key driver of profits -- dipped to 2.47% last year from 2.55% in 2005, but a decline had been previously flagged.
RBS said its bad debt loss was 1.88 billion pounds, up 10% from 2005. It said arrears on UK personal unsecured lending had levelled off in the second half of last year.
Income in its corporate markets business rose 17% last year, underpinning a 20% rise in its operating profit to 5.55 billion pounds.