RBS not in talks with BofA

By Steve Slater

LONDON (Reuters) - Royal Bank of Scotland (RBS.L) said it was not in talks with Bank of America (BAC.N) regarding an attempt to resolve the purchase of LaSalle Bank, the U.S. arm of ABN AMRO which is a subject of dispute in the proposed RBS buyout of ABN.

Britain's second biggest bank also said on Tuesday its consortium's proposed 71 billion euro ($95.6 billion) takeover of ABN AAH.AS would result in about 19,000 job cuts, fewer than the 23,600 planned by Barclays (BARC.L) under a rival offer.

Both estimates exclude LaSalle, which the RBS consortium wants as part of its proposed deal, but which ABN has agreed to sell to Bank of America (BofA).

RBS confirmed in a trading update its first-half earnings should beat analysts' expectations but said afterwards there had been no progress in reaching a compromise with BofA on the purchase of LaSalle.

"I don't see any particular urgency on the subject," Chief Executive Fred Goodwin told reporters on a conference call. "I'm happy to have a conversation, we've had one before -- which would suggest there is a basis for conversation -- but if one happens it happens, if it doesn't it doesn't," he said.

RBS and its partners -- Santander (SAN.MC) and Fortis (FOR.BR) -- last week launched a mostly cash offer for ABN worth about 10 percent more than an agreed offer by Barclays.

The consortium's offer is conditional on also buying LaSalle, which ABN has agreed to sell to BofA, which says its deal is binding. A Dutch court is due to rule next month on whether ABN shareholders should vote on the unit's sale.

WILL BEAT FORECASTS

RBS said it expects its UK retail bad debts to show a "modest reduction" in the six months to the end of June and costs as a ratio of income should improve from the 2006 level of 42.1 percent.

RBS already said last week it should beat analysts' forecasts for first-half underlying earnings. Profit before tax and exceptional items should be 10.3 billion pounds in 2007, up 9 percent from 9.4 billion in 2006, according to a Reuters Estimates average forecast from 11 analysts.

RBS said retail deposits and lending volumes for Citizens, its U.S. arm, remained subdued in the first half but margins in the business had stabilized after falling sharply last year.

Weakness in the U.S. dollar will also hurt income reported in sterling. A 10 percent fall in the dollar -- which was roughly seen in the first half compared to a year before -- has a 1 percent impact on group income, the bank said.

Goodwin said broad trends were similar to those seen in 2006. "Credit metrics are strong and continuing to improve on the retail side, there's good cost discipline, it's more of the same," he said.

By 0730 GMT RBS shares were up 0.6 percent at 641-1/2 pence, valuing it at 60 billion pounds.

Goodwin said there had been a "gentle movement upwards" in insurance premiums, but declined to call a definite turn in the motor insurance market, where premiums have lagged claims inflation for several years: "We are starting to see a floor emerging," he said.