Royal Bank of Scotland (RBS) expects to record pre-tax profit in excess of £10 billion, in 2007.
The news will be a relief to investors who were anticipating a lower figure, after the bank announced that its writedowns in connection with the US sub-prime mortgage crisis and leveraged loans amounted to £1.2 billion.
RBS’s chief executive, Sir Fred Goodwin, has warned that the writedowns may be increased at a later date and that forecasts were “meant to be conservative”.
Sir Fred added: “It hasn’t been beer and skittles this year, but we are anticipating a strong set of results.”
The bank, which is UK’s second largest high street lender, is forecasting losses of about £950 million on its exposure to US sub-prime debt, and a £250 million writedown on its leveraged loans.
RBS’s sub-prime losses were, however, below analysts’ expectations; some were predicting writedowns of up to £2 billion.
RBS is in the process of offsetting £250 million of the losses by adjusting the value of its own debt.