Royal Bank of Scotland's IT bill shoots up to nearly £400m

The Royal Bank of Scotland (RBS) has announced bumper half-year profits of £3.85bn despite taking a hit on rising IT costs associated with the integration of several recent acquisitions and takeovers.

The banking group's interim report for the half year ended 30 June show that group technology costs rose 23 per cent from £319m in 2003 to £391m in 2004.

RBS CEO Sir Fred Goodwin said the bank's cost/income ration had taken a hit on integrating acquisitions but that the benefits of that will start to take effect from next year.

"The figures represent a number of acquisitions which are still mid-stream. There's a lot still to flow through from the businesses we are integrating," he said.

The bank described the migration of the NatWest's IT systems from that takeover in 2000 as one of the largest IT integration projects in the world and since 2003 RBS has also bought Irish mortgage lender First Active, insurer Churchill and US bank Charter One.

Goodwin said "significant components" of the Churchill IT integration are already complete, with much of it now on a common IT platform.

Technology is also the focus of RBS' group efficiency programme to cut costs internally and several projects are lined up for the second half of this year. These include image and workflow capability to service centres and a customer query management system that will move messages around the group electronically, saving eight million internal faxes a year.

One project already completed has converted branch reports from being sent out on paper to being delivered directly to computer screens, saving 18 miles of paper a day.

"It's not rocket science but it marks a real impact on our business," he said.