RBS back in the black

The bank, which is 83 per cent taxpayer-owned, was helped by improving bad debt losses as it moved from a 248m loss in the first quarter to a 257m profit between April and June.

Chief executive Stephen Hester said the turnaround of the business is on track, but added: "The rebuilding of RBS is a marathon not a sprint."

RBS is the last of the UK's "big four" banks to report results this week, with profits from the quartet totalling more than 12bn.

The bank's retail banking arm - which owns NatWest and now has 12.9 million current accounts - boosted operating profits to 416m during the first half, helped by wider margins on lending.

The group's net interest margin - the gap between what it pays in interest and what it charges in loans - rose to 3.77 per cent from 3.57 per cent a year earlier at its retail arm. Bad debt losses fell to 687m from 824m in the first half of last year.

"Widening asset margins across all products and an increasing number of mortgage customers choosing to remain on standard variable rate were the key drivers," the bank said.

The bank said it remains on track to meet its 8bn mortgage lending target for the year to February 2011, although RBS saw signs of weakness in the second quarter with a 21 per cent fall in application volumes.