Salt solution

28 February 2008 By Mike Verdin

The UK bank forecasts an extra £450m synergies from its Dutch purchase. Sounds good? But at the same time, RBS has revealed that its previous megadeal, Charter One in the US, is struggling. Some scepticism over its ability to extract value from deals is warranted.

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Royal Bank of Scotland raised the synergy targets for last year's acquisition of part of Holland's ABN Amro as it announced second half earnings up 16.3% at £3.7bn.

The bank raised its targets for cost savings from the deal in three years by about E300m (£230m) to E1.6bn, and its target for revenue synergies by E300m to E690m. RBS said that the extra synergies implied that ABN would return 16% on RBS's investment, compared with the 13.2% originally announced, keeping other assumptions the same as when its offer was made in July.

Excluding ABN's contribution, RBS's underlying pretax profits rose 8.2% to £5.1bn on revenues down 1.3% at £14.2bn.

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