Royal Bank of Scotland, the U.K. lender vying to buy ABN Amro of the Netherlands, said its first-half earnings are set to come in slightly ahead of market forecasts, helped by tight cost controls and reduced consumer bad debt charges.
In a trading statement, RBS said the rate of underlying earnings growth for the first six months of 2007 is on course to be "slightly higher" than that implied by the current full-year consensus earnings per share forecast of 72.1 pence.
RBS, the U.K.'s second-biggest bank, said it is set to benefit from cost discipline, with total expenses as a proportion of income over the first half expected to be below the figure for 2006 as a whole.
The bank also predicted a "modest" decline in U.K. consumer bad debt charges, with total bad debts as a proportion of the overall loan book expected to fall compared with the first half of 2006.
RBS added that margins at U.S. subsidiary Citizens are stable, with good growth in lending to businesses offsetting "subdued" lending to consumers. The bank stressed that credit conditions at Citizens remain strong, in contrast to a recent surge in debt arrears that has hit lenders focused on the U.S. sub-prime mortgage sector.
"We expect that our first half results will again demonstrate the group's ability to deliver profitable organic growth, building on the many opportunities with attractive risk and reward characteristics that we have established in the U.K. and internationally," RBS chief executive Sir Fred Goodwin said. RBS shares closed at 638 pence yesterday, valuing the company at £20.1 billion ($39.79 billion).