ROYAL Bank of Scotland has curtailed its business with firms linked to Russia in the wake of the increasingly violent conflict in Ukraine.

RBS said it has trimmed its net exposure to Russia by £100 million in the past six months, and has hedged against almost half of the remaining £1.8 billion it has tied up in loans to the country's companies, banks and state institutions.

The company has also tightened its credit rules for borrowers with Russian links, imposing tougher limits and making it harder for new customers to access loans.

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On Thursday, the European Union banned five of Russia's largest banks from raising money through the continent's financial markets as part of a broader clampdown on the Kremlin's financial ties to Europe.

RBS also reiterated its concerns about next month's Scottish referendum, warning yesterday that a Yes 2 vote would "be likely to significantly impact the group's credit ratings" and unsettle its monetary, legal and regulatory foundations.

While RBS has not expressed an opinion on the outcome of the referendum, Vince Cable, the coalition's business secretary, told MPs in February that RBS would "inevitably" move its headquarters south of the Border if Scotland voted in favour of independence.

The bank, which is 81 per cent owned by the UK taxpayer, confirmed yesterday that its half-year profits before tax have doubled since last year to £2.65 billion, as it makes "steady progress" towards becoming a smaller and simpler institution.

Impairment losses shrank dramatically to £269 million, down from nearly £2 billion in the same period last year. The bank said brightening credit conditions in the UK and Ireland helped improve this figure.

The results were so much stronger than expected that RBS released most of the data last Friday, a week earlier than expected - though it also noted that "there are bumps in the road ahead of us".

"I am pleased we have had two good quarters, but no one should get ahead of themselves here," said chief executive Ross McEwan, repeating his cautious message of last week.

Mr McEwan pointed out the host of legacy issues at the bank, which include the expected sale of its US business Citizens, representing 13.5 per cent of group revenues.

The bank spent £514 million on restructuring over the last six months, accelerating from the £271 million it shelled out in the previous first half. The figure includes a £150 million charge booked on Williams & Glyn ahead of its delayed debut on the high street as a separate bank with more than 300 branches. The spin-off is not expected to take place until 2017, following a failed attempt to sell the business in 2012.

RBS expects to splash out £5 billion on overhauling its businesses in the three years to 2017.

The group has shed 8,000 jobs worldwide in the past year, taking its headcount to 113,600 at the end of June. The group spent £3.3 billion on employees during the first six months of the year, down from £3.58 billion a year ago.

RBS has lost "many talented staff" because of the government's stance on variable pay, it complained yesterday. UK Financial Investments, the state body that looks after the taxpayer's stake in RBS, did not support the bank's plan earlier this year to award some staff bonuses worth 200 per cent of their base pay.

Despite savings elsewhere in the business, the RBS pension fund requires £650 million in extra payments a year over the next two years, in addition to the £270 million annual running costs. This contribution is needed to close the £5.6 billion deficit identified during a review in May, RBS disclosed yesterday.

While the bank has set aside less money in the last six months for lawsuits and penalties, earmarking £250 million compared with £620 million a year ago, there remain "significant conduct and litigation issues that will likely hit our profits going forward", Mr McEwan warned. The firm is co-operating with investigations into the rigging of several global benchmarks including Libor.