Royal Bank of Scotland said it expects its UK bad debts to fall in the first half of this year to help it beat forecasts for underlying earnings.
RBS, Britain's second biggest bank and owner of Ulster Bank, said today that its UK retail markets unit would show a "modest reduction" in impairment losses in the six months to the end of June.
The bank, which is trying to lead a takeover of Dutch rival ABN Amro, said costs as a ratio of income should improve from the 2006 level of 42.1 per cent.
RBS said recently it should beat analysts' forecasts for first-half underlying earnings. Profit before tax and exceptional items is expected to be £10.3 billion sterling ($20.5 billion) in 2007, up 9 per cent from £9.4 billion in 2006, according to analysts' forecasts.
A consortium led by RBS last week offered to buy ABN Amro for € 71.1 billion, trumping an agreed takeover offer by Barclays.