RBS pumps up profits to near £7bn

RBS continued to expand in 2004

UK banking giant Royal Bank of Scotland (RBS) has reported a 14% increase in annual pre-tax profit, helped by its recent acquisitions.

Pre-tax earnings for the year to December were £6.9bn ($13.1bn).

The owner of NatWest and Direct Line continued its expansion in 2004 by buying Charter One bank in the US.

The results "demonstrate the group's ability to sustain growth across the broad range of our businesses," said chief executive Sir Fred Goodwin.

"The diversity of our income streams is an important factor in our ability to maintain consistent growth."

Acquisition trail

Turnover at the UK's second-biggest bank rose 18% to £22.7bn.

This is a very solid set of numbers, modestly ahead of expectations Keefe Bruyette & Woods Check RBS share price How to beat the banks

RBS said acquisitions during the year, which also included Ireland's First Active and the credit card business of People's Bank in the US, had a "bearing" on the results.

The bank said its $10bn purchase of Charter One means about a quarter of RBS profits now come from the US.

Sir Fred said RBS was not planning further big US acquisitions.

"In the near term, the focus is on completing the one we have done and taking advantage of the organic growth opportunity," he added.

The group said its retail banking arm saw strong growth in mortgages, loans and savings after customer numbers rose.

Its insurance division saw profits increase by 52% on the back of its purchase of Churchill in 2003.

The Retail Direct unit, which provides personal finance products for companies such as supermarket Tesco, continues to attract business.

RBS's corporate banking division also helped boost profits, seeing an 18% increase in earnings to £4.2bn.

The bank said its staff profit sharing scheme would pay out £214m this year. More than 100,000 employees in UK and Ireland would receive an average of £2,100 each.

Share strength

Shares in RBS closed down 1.33% at 1787 pence.

The stock had outperformed other banks in recent months and analysts said the results may have been anticipated by investors.

"This is a very solid set of numbers, modestly ahead of expectations," said Keefe Bruyette & Woods in a note.

"The shares were strong relatively yesterday (Wednesday), so today's outperformance, if any, may be muted."

The RBS profits were higher than the £4.6bn announced by rival Barclays earlier this month, but are expected to be overshadowed by figures next week from HSBC.

The increase in RBS profits comes on the back of strong results from oil giants BP and Shell, which prompted calls from some consumer groups for a windfall tax on major companies.