Royal Bank of Scotland (RBS) has promised to deliver pre-tax profits of more than £10 billion this year, despite taking a £1.5 billion writedown against its exposure to American sub-prime mortgages and leveraged loans.

Shares in the Edinburgh-based bank surged as much as 9.77 per cent, up 44p at 511p, after Sir Fred Goodwin, chief executive, delivered a reassuring trading update that sent a wave of relief through City investors.

Sir Fred said: "It hasn't been beer and skittles this year, but we are anticipating a strong set of results.

"While we have seen some credit market deterioration, there have been a number of planned gains during the period [this year]. If you ignore the gains and the writedown we still expect to be comfortably ahead of consensus."

The shares drive added more than £4.5 billion to RBS's market value, pushing it past the £50 billion mark, against last night's closing value of £46.6 billion.

RBS revealed that it would take a direct hit of about £950 million on its exposure to US sub-prime debt, alongside a £250 million writedown on its leveraged loan commitments.

It will also write down £300 million in the second half against sub-prime exposure at ABN Amro, the Dutch bank it now part-owns.

RBS offset £250 million of its losses by adjusting the value of its own debt. Total group writedowns will be recorded at £950 million. RBS said it expects full-year results to be ahead of City forecasts of £9.9 billion.

Sir Fred said that while today's preliminary writedowns may be increased at a later date, the bank's forecasts were based on current predictions for the life of its loan exposure and were "meant to be conservative".

The bank's sub-prime hit was less than many observers had expected. Analysts at Keefe, Bruyette & Woods said: "All in all, given market fears coming into this statement, we'd expect a positive reaction."

Keith Bowman, equity analyst at Hargreaves Lansdown, the stockbroker, said: "RBS has responded to recent concerns over its current trading with some style."

Some analysts were predicting writedowns of as much as £2 billion at RBS, which has followed Barclays, its competitor in the race to buy ABN, in delivering keenly anticipated full-year trading updates, their last before their full-year profits numbers in February.

Sir Fred said that the integration of ABN Amro was going well and would deliver slightly better than expected cost savings.

However, he declined to be drawn on a number of other issues, including an investigation by the American authorities into how carefully underwriters had assessed the risks of securities backed by US mortgages.

RBS is one of a number of banks to have received a subpoena for information from the New York attorney-general, Andrew Cuomo. Bear Stearns and Merrill Lynch are also known to have received requests for data.

Sir Fred said it was early days in the investigation and declined to provide detail about the information RBS would provide.

He also shrugged off reports of a dispute over bonus payments with bankers at ABN Amro, which could cost RBS a reported €750m. Sir Fred said the reports were "news to me".

"We have a long relationship with an investment bank as you call it but it's not been characterised by disputes with their employees. People are anxious to know what their bonuses are and in a while they will find out.

"Arrangements were in place long before we took over ABN. No one has suggested that we won't honour our obligations. I think it's rumour getting ahead of itself."

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