AGM Statement

Royal Bank of Scotland Group PLC 28 April 2006 The Royal Bank of Scotland Group plc AGM Statement 28 April 2006 The Meeting will deal with the proposed Resolutions as outlined in the Notice of Meeting issued to Shareholders dated 13 March 2006 and will provide a summary of the business and financial performance of the Group in 2005. The following is an extract from the speech to be made by Sir George Mathewson, Chairman, at the meeting. 'I am delighted to report another excellent set of results for the Group in 2005. Total income at £25.6 billion was up by 14%, and operating profit at £8.25 billion was up by 16%.' 'Our basic earnings per share increased by 13%, and our adjusted earnings per share increased by 8%. ' 'As a result of these strong earnings, and disciplined balance sheet growth, we increased our Tier 1 capital ratio to 7.6%, and produced a good return on equity of over 18%.' 'Since we bought NatWest six years ago, in March 2000, we have increased the Group's total income by £14.5 billion, or 131%. And, of this total, over 60% has come from organic growth in income. This is equivalent to growing more than a whole new NatWest in six years.' 'Over recent years we have increased the diversity of our activities by geography and have reduced our dependence on the UK. In 2005, 42% of our operating profit came from outside the UK - up from 34% in 2004 and only 15% when we bought NatWest.' 'You will all be familiar with our strong position in the US, where Citizens now ranks as the eighth largest bank in the US by both total assets and by deposits, and the Group's total activities in the US rank sixth among US banks. ' 'But it is also worth highlighting the progress we have made in building up our European businesses. In fact, our operating profit from Europe in 2005 was more than the profit made by Citizens prior to the acquisition of Charter One in 2004.' 'Both Europe and the US are, and will continue to be, significant parts of our business.' 'In 2005, our Group cost:income ratio was 42.4% - slightly higher than the previous year, reflecting the acquisition of Charter One, which had a higher cost:income ratio than the Group.' 'Excluding acquisitions, the Group cost:income ratio was held flat at just under 42%, despite significant investments to enhance customer service and support future growth across our activities.' 'When we bought NatWest, the Group cost income ratio was nearly 58%. Its current level of 42% compares very favourably with large UK and international banks.' 'In total, our lending to customers increased by 16%, while provisions for bad debts increased by only 7%. Overall, our portfolio credit quality and metrics remained stable.' 'In view of the Group's Tier 1 capital ratio at the end of 2005, and our assessment of the capital outlook going forward, we decided that there was capacity to return capital to shareholders.' 'In implementing this decision, our thoughts turned first to dividends. We are proud of our dividend record - we increased our dividend by 15% or more each year for 12 years in succession up to 2004 - but our earnings over this period grew even faster, so our payout ratio declined to 34% for 2004 and, at this level, had fallen behind the payout ratios of our peers and the market more generally. ' 'So we are recommending a 29% increase in our final dividend for 2005, making a 25% increase in the total dividend for the year and taking our payout ratio for 2005 up to 41%.' 'Beyond this proposed dividend increase, the numbers supported a further distribution to shareholders and, as you will know, along with the announcement of our 2005 results at the end of February, we announced our intention to return up to £1 billion to shareholders through share repurchases, by February 2007. ' 'Another development during 2005 was our establishment of an exclusive strategic partnership with the Bank of China.' 'As you may be aware, our investment in Bank of China was formally completed just before the year end in December 2005. This investment, while a good investment in its own right, will also enable us to access joint venture and business opportunities in China. The purchase was financed by the sale of our shareholding in Banco Santander. We have been very encouraged by progress to date in building our relationship with Bank of China, both in terms of developing joint business opportunities in a number of areas, and in helping Bank of China to improve their internal structures and systems.' 'In pursuing our goal of generating superior, sustainable value for our shareholders, we need to do more than deliver good financial results. We need to add value for our customers and our people. We must also contribute to the communities in which we operate.' 'To measure our progress in adding value for our people, we participate each year in a detailed analysis of employee opinion carried out for us - and for other large banks in the UK and internationally - by the independent research firm ISR. In 2005, 86% of our employees completed the Employee Opinion Survey, 2% more than the previous year and 20% more than the industry average.' 'It is particularly satisfying to be able to report that RBS improved its score - over already strong scores in 2004 - in each of the 14 categories surveyed by ISR.' 'In comparing our results with those of other financial groups, RBS outperformed the Global Financial Services Norm, for the first time, in each of the 14 categories surveyed - an outstanding achievement by any standards.' 'During 2005 the value of our community investment programme was £56.2 million, a significant increase from the £46 million we contributed in 2004.' 'It is more difficult to get measures of our success in adding value to the communities in which we operate, but we do look at published measures of Corporate Responsibility. In 2005 our overall score in the Dow Jones Corporate Responsibility Index rose by 12% to 76%, placing us fourth among global banks. ' 'Also in 2005, the international organisation AccountAbility placed our 2004 Corporate Responsibility report 14th among the world's top 100 companies, and 2nd among the world's banks.' '2005 was another year of excellent performance by our Group. Increased earnings and strong capital generation enabled us to keep investing for future growth as well as to raise our dividend significantly and to embark on a programme of share repurchases.' 'These results demonstrate the strength and momentum of the Group and the capabilities of the diverse business platform we have built. I believe that our platform provides us with a diverse range of opportunities in a number of geographies.' 'The Group has continued to perform well in the first few months of this year in line with the comments which we made at the full year results presentation on 28 February.' Forward Looking Statements This announcement contains forward looking statements, including such statements within the meaning of Section 27A of the US Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements concern or may affect future matters, such as the Group's future economic results, business plans and strategies, and are based upon the current expectations of the directors. They are subject to a number of risks and uncertainties that might cause actual results and events to differ materially from the expectations expressed in the forward looking statements. Factors that could cause or contribute to differences in current expectations include, but are not limited to, regulatory developments, competitive conditions, technological developments and general economic conditions. The Group assumes no responsibility to update any of the forward looking statements contained in this announcement. This information is provided by RNS The company news service from the London Stock Exchange
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