Lower impairment losses helped Royal Bank of Scotland's second quarter operating profit rise from the first quarter, and the part-nationalized group expected good medium-term prospects for its business.

Royal Bank of Scotland , which is 83 percent state-owned, posted an operating profit of 869 million pounds ($1.38 billion) for the quarter ending June 30, compared to its first quarter operating profit of 713 million pounds.

Impairment losses fell to 2.49 billion pounds from 2.68 billion in the first quarter, reflecting a strengthening of the global economy.

Europe's top banks, such as HSBC , BNP Paribas and Barclays , have posted bumper profits this week on the back of lower bad debt charges, although some investors remain concerned over their underlying prospects.

RBS's core retail and commercial banking business posted higher revenues during the quarter, but its investment banking division had a more difficult time, with revenues falling 31 percent from the first quarter.

RBS said it was on track to meet its targets, which include plans to sell billions of pounds worth non-core assets.

Chief Executive Stephen Hester is shrinking the bank's balance sheet after an aggressive expansion by predecessor Fred Goodwin over the previous decade stretched the group's finances, leading RBS to be bailed out during the credit crisis.

RSB shares closed down 0.1 percent at 52 pence on Thursday, giving the bank a market capitalization of around 29.3 billion pounds. ($1=.6318 Pound)

(Reporting by Sudip Kar-Gupta; Editing by Steve Slater)

BNP Paribas Royal Bank of Scotland