RBS expects to "significantly outperform" its estimates for dealing with impaired loans in 2014, according to a trading update.
The bank reported an absence of large one-off impairments and lower levels of new non-performing loans during the third quarter. It said the quarter has seen continued improvements in economic conditions for its key markets, including Ireland.
It told investors: "RBS now expects to significantly outperform its previous guidance of c£1bn total impairments for final year 2014. Previously disclosed uncertainties remain, particularly relating to conduct and litigation matters."
'Bad bank' RBS Capital Resolution, which is responsible for running down assets, saw "strong operating performance" over the quarter, it said, with the potential for an acceleration of its wind-down goals.
Meanwhile, rising Irish residential property prices combined with debt management has helped its subsidiary, Ulster Bank, to reduce arrears.
RBS will release its Q3 2014 interim management statement on 31 October.
Shares in the bank jumped shortly after the market opened to stand 4% higher at 376p by 8.30am.
