The Royal Bank of Scotland (RBS), which is fronting a European consortium's take-over bid for Dutch giant ABN Amro, said on June 05 that first-half earnings would beat market expectations.
"The group continues to perform well in 2007 and we expect the rate of underlying earnings growth in the first six months of the year to be slightly higher than that implied by the consensus earnings forecast for the full year," RBS said in a trading update.
Market forecasts are for earnings per share - net income divided by the total number of shares - of 72.1 pence in the current financial year. RBS, which is the second-biggest bank in Britain, also revealed that the number of consumer loans, which are written off, or bad debts, should see a "modest" decline in the current year.
But results would be "slightly affected by the weakness of the US dollar," according to RBS, which derives one quarter of its profits from the United States following the 2004 purchase of Charter One Financial.
In reaction, RBS shares advanced 0.39 percent to 640.46 pence in early morning deals on London's FTSE 100 index of leading companies. The FTSE showed a gain of 0.20 percent at 6,677.60 points.
"This is a gentle reminder that even if it doesn't complete the ABN deal, RBS is still a very good business," said Panmure Gordon analyst Sandy Chen, who has a "buy" recommendation on RBS stock. Last week, the RBS-led consortium, which includes Banco Santander of Spain and Belgian-Dutch group Fortis, bid 71.14 billion euros (95.64 billion dollars) for ABN Amro.
That topped an agreed take-over from Barclays of 67 billion euros, but ABN has yet to respond to the new RBS offer. In a conference call following Tuesday's trading update, RBS chief executive Fred Goodwin confirmed that 19,000 jobs would be lost if the bank's bid for ABN was successful.
The estimate of 19,000 job losses was first published last week by Dutch union De Unie, and compares with an estimated 23,600 job cuts in the event of a Barclays take-over. Goodwin also confirmed that no talks between RBS and Bank of America over ABN's US subsidiary, LaSalle, were currently planned.
The new RBS offer was conditional on ABN shareholders rejecting the planned 21-billion-dollar sale of LaSalle, to Bank of America. That had been part of the Barclays take-over deal.