By Steve Slater

LONDON (Reuters) - Royal Bank of Scotland (RBS.L: Quote, Profile, Research) reported higher profits and dividend and lifted the cost savings it expects to make from its takeover of ABN AMRO, calming investor nerves even as it widened a write-down on risky assets.

RBS raised its write-down due to the impact of the U.S. subprime housing crisis and credit crunch to 1.6 billion pounds, excluding ABN. It had previously flagged a hit of 1.2 billion pounds through to the end of November.

The bank also marked down the fair value of ABN's wholesale businesses by 978 million pounds due to its exposures to problem assets.

But RBS gave a bullish outlook for the benefit of last year's record takeover of Dutch bank ABN AMRO, estimating the deal will boost its earnings by 9 percent by 2010, against the 7 percent predicted at the time of its offer.

Fred Goodwin, RBS Chief Executive, rejected criticism he had overpaid for the ABN assets he bought as part of a consortium takeover. "I don't get a lot of things coming across my desk that are 9 percent earnings accretive," he said.

RBS raised its expected annual cost and revenue benefits from the deal by a third to 2.3 billion euros (1.74 billion pounds).

The bank reported 2007 underlying operating profit of 10.3 billion pounds, up 9 percent from 9.4 billion in 2006 and the same as the average forecast by a Reuters Estimates poll of analysts. The impact of the write-down's was offset by gains on asset disposals, notably Southern Water.

RBS shares closed down 2 percent at 402 pence, in line with a weak broader share market, after an early rise to 427.5p fizzled out.