The bank said it had increased the amount of cash set aside to cover bad loans to �742m ($1.2bn) in the first six months of 2003, up from �625m a year earlier, but stressed that the increase was in line with overall growth in lending.

RBS chief executive Fred Goodwin added that he was "not losing sleep" over bad debts.

The bank's reassuring message on debt comes amid growing fears that a prolonged period of low interest rates has encouraged many consumers to borrow too much, leading to a possible rise in bad loans when rates rise again.

Profits grow

RBS added that solid growth across most of its units had lifted pre-tax profits before financial charges for the first half of 2003 to �3.4bn, 10% up on the same period last year, and in line with City forecasts.

Revenues were also higher, climbing 11% on the year to �9bn.

RBS is the third of the UK's big four High Street banks to meet or exceed analysts' expectations for the first half of the year, with Lloyds TSB and HSBC both unveiling solid results in the past week.

Mr Goodwin also sounded a cautiously upbeat note for the months ahead, saying a "fundamentally optimistic outlook" was partly offset by "elements of uncertainty."

Britain's major banks have been hit by the slowing global economy over the past three years, with some forced to write off loans to bankrupt US companies and the crisis-hit Argentine economy.