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RBS have recorded a £1bn profit in the first half of 2010, making money again thanks to improving levels of bad debt and mortgage borrowers happy to remain on standard variable rates.

Royal Bank of Scotland posted pre-tax profits of £1.14bn for the first half, up from just £315m for the same period last year. RBS’s operating profit was £1.6bn compared with an operating loss of £33.4bn in 2009.

Chief executive Stephen Hester has however, said the figures had been improved by accounting technicalities and the true net profit at RBS was just £9m for the first half.

The bank’s return to profit is good news for the taxpayer, as the government has a colossal 83% stake in the bank following a bailout in 2008. The stake grew in value after RBS posted the results this morning. Shares stood at 1.9p, or 3.65%, higher at 53.9p in early trading.

Hester said, “The rebuilding of RBS is a marathon and not a sprint. I am pleased with the steady momentum in our core customer-facing businesses. However, our path to sustainable profitability and other improvements we target will not be linear, given the scale of management action in our core businesses, continuing risk reduction in non-core and the impact on both a changeable economic and regulatory environment”.

In relation with other reporting from major banks this week, RBS suffered less damage from impairments that had been first feared. The banks have had to shoulder sharp write-downs to the value of mortgage-backed debt since the financial crisis first hit, in 2007.

The promising news regarding RBS comes shortly after the revelation that the UK economy had grown 1.1% in the second quarter, which equates to its fastest rate increase in four years.