ROYAL Bank of Scotland (RBS) is expecting to generate a quarter of its profits in the US following a £5.8bn acquisition.

The deal for Charter One Financial was struck through the group's US subsidiary, Citizens, the second largest bank in New England.

RBS, which is based in Edinburgh, said the acquisition, which it hopes to complete by the end of the year, would create an operation with extensive coverage across nearby north-eastern and mid-western states.

Citizens, which was founded in 1828 and became part of RBS in 1988, will become the country's seventh largest bank in terms of assets and deposits following the acquisition of Charter One, which is based in Cleveland, Ohio.

RBS described the acquisition as low risk, and said the two banks were a close fit in terms of geography and products.

Fred Goodwin, group chief executive, said: "This is a highly logical and very natural acquisition for Citizens to make.

"As well as making good financial sense in its own right, it opens up another interesting range of options for Citizens to maintain its strong growth momentum."

RBS said part of the financing for the acquisition would come from new shares - a move expected to raise about £2.5bn.