Royal Bank of Scotland today revealed that it faces a £250 million hit from the floods that have devastated the heart of England this summer.

The group, which owns the insurers Direct Line and Churchill, said the claims bill from South Yorkshire in June was £125 million and that it expected a similar charge for July following the floods in Gloucestershire.

The comments came as RBS brushed aside fears over the debt crisis engulfing stock markets worldwide by revealing an 11 per cent jump in operating profits to nearly £5.1 billion in the six months to June 30.

RBS confirmed that household premiums would rise as a result of the flooding, but refused to state the extent of the increase.

Yesterday Norwich Union, Britain’s biggest general insurer, warned that it would increase insurance rates for homes across the UK by an average of 10 per cent.

Sir Fred Goodwin, RBS chief executive, said: “The meteorologists will tell you the scale of the flooding was an event that happens once every 150 years.

“It’s just unfortunate that we had two such events in a fortnight.”

He added: “Premiums are set in a very competitive market, but the pressure will be upwards.”

RBS said group income rose 8 per cent to £14.7 billion in the opening half and losses from bad debts fell 2 per cent to £871 million.

Profits at its consumer-banking division rose by 7 per cent to nearly £1.2 billion, while profits at its corporate banking business rose 16 per cent to £3.2 billion.

Sir Fred said it was a “very strong set of results”. He added that the bank remained confident it would win the battle with fierce rival Barclays for ABN Amro.

RBS is leading a consortium bidding €71 billion (£48 billion) for the Dutch bank. RBS shareholders are due to vote next Friday on whether to support the offer.

Barclays has lodged a cash and share bid of €65 billion.

John Varley, Barclays chief executive, yesterday insisted his business would win the ABN battle “with our wits”.

Today, Sir Fred countered: “I always make a point of relying on those. However, I doubt it’s wits the ABN shareholders are looking for, but substance.

“Actually what I would have thought they are looking for is cash. The fact our offer is higher seems a fairly logical basis for them to accept our bid.”

The group added that it had not been affected by the fallout from the credit crunch in the US, which has hit the appetite for leveraged debt.

Johnny Cameron, chief executive of RBS Corporate Markets, described the market squeeze as a “blip” and said that deals would begin to happen again next month.

“I expect we will see a quiet August and it will be September before people come back and buyers and sellers get together and do a transaction.”

Sir Fred added: “RBS is a business that likes volatility and we cannot complain about the volume of volatility we have seen.”

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax