Royal Bank of Scotland has revealed write-downs of £1.2 billion from the US sub-prime mortgage crisis, but is confident of beating profit expectations.

The company has offset £250 million of losses from the credit turmoil by using its own cash reserves instead of turning to more expensive wholesale credit markets.

Second-half savings deposits have soared after picking up business from customers deserting Northern Rock.

The group's write-downs were far better than feared, with analysts expecting RBS to take a hit of up £2 billion. This prompted the bank's shares to rise 6% to 492.25p in early trade on Thursday.

Investors will be relieved at today's announcement as shares in the bank had fallen by nearly a fifth since September on concerns over the potential impact of the credit crisis.

The acquisition of Dutch rival ABN Amro, as part of a consortium with Banco Santander and Fortis, should produce returns 'somewhat greater than anticipated' at the time of the bid, RBS said.

It added that ABN Amro's adjusted 2007 earnings are expected to be consistent with earlier guidance, including £300 million of credit-related write-downs.