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Two banking subprime nasties for the price of one. In a pre-clsoe trading update, RBS has set out exactly what it has lurking in its closet and also flung open the doors on ABN Amro’s exposure to subprime-backed ABS and CDOs.

The end result looks considerably better than some had feared - and RBS shares were on Thursday forecast to open about 7 per cent higher.

RBS said it would take total write-downs of £1.2bn in the second half - broken down into £950m related to its exposure to mortgage-backed securities and CDOs, and £250m on exposure to debt for the financing of the leveraged buyouts.

That total would be offset, RBS added, by the a mark-down to the value of the bank’s own debt that it’s carrying on its books. The reduction in the value of RBS debt amounts to £250m.

For ABN, there’s an additional £300m of write-downs on the Dutch bank’s mortgage-related exposure, dealt with as part of the acquisition accouting changes.
So across the bank there’s £1.25bn of write-downs of assets - plus the £250m related to stuck leveraged loan deals. A grand total of £1.5bn - before the offset from the falling value of its own debt.
Analysts had feared that the two banks would together have to write-down between £1bn and £1.9bn, the bulk of which was expected to come from US subprime exposure.

The write-downs at RBS itself are balanced by the gains made on recently announced disposals, such as the £1bn sale of Southern Water and a £900m property portfolio.

All in all, RBS said on Thursday, there would be a “net positive impact”. But even excluding that bump, operating profit excluding ABN is expected to be “comfortably ahead of the consensus forecast.” Tier 1 capital is expected to end 2007 in the bank’s target range of 7 to 8 per cent.

Good news also on the conduit front. Investor demand for commercial paper issued by the RBS conduits, with no subprime exposure to US residential mortgages, remains strong, the bank said.

ABN, which back in September had more than twice as much in such vehicles as RBS, is also seeing strong demand, and its conduits have less than 0.5 per cent of their assets in subprime. Neither of the two banks have material exposure to SIVs.

For those hunting haircut detail, RBS laid out their exposure: