Pre-close Trading Update

Royal Bank of Scotland Group PLC
08 December 2005

                      THE ROYAL BANK OF SCOTLAND GROUP PLC


                            Pre-close Trading Update


8 December 2005

Introduction


The Royal Bank of Scotland Group ('RBS') will be holding discussions with
analysts and investors ahead of its close period for the year ending 31 December
2005. This statement sets out the information that will be covered in those
discussions.


Comments in this statement are based on expected trends between 2004 and 2005,
as if IFRS had applied in full to our results for both 2004 and 2005. Comments
relate to expected results for the full year, unless otherwise stated.


Summary


RBS has continued to perform well in 2005 and our results are expected to be in
line with market expectations. Highlights of the Group results for 2005 are
expected to include good growth in income, both organically and in total, a
continuing high level of efficiency, good overall credit metrics and delivery of
the expected benefits from recent acquisitions.


Income and Margins


Income mix: The mix of income in 2005 is expected to be similar to that in the
first half, with a growing proportion coming from our various overseas
activities. It is expected that our income from unsecured lending to UK
consumers will continue to account for less than 10% of total income in 2005.


Non-interest income: Non-interest income, which is expected to account for over
60% of total income, has continued to grow strongly in 2005, reflecting good
growth in banking fee income, financial markets income and insurance premium
income.


Lending and deposit volumes: During 2005 the Group has continued to achieve good
growth in lending and deposits across its banking activities. Large corporate
and mortgage lending have continued to expand more rapidly than unsecured
personal lending, where growth has slowed to more normal levels after strong
growth in recent years.


Margins: The Group's net interest margin in the full year 2005 is expected to be
slightly lower than in the first half of 2005, principally due to proportionally
higher growth in large corporate and mortgage lending and because the US yield
curve has flattened further.


Divisions


Corporate Banking and Financial Markets continues to perform strongly, with 2005
income benefiting from strong growth across a broad range of customers, products
and geographies. Retail Markets continues to achieve good growth in income, with
slower growth in unsecured lending and good growth in deposits, reflecting the
transition in consumer behaviour which we anticipated. New business margins in
personal banking products have shown signs of improvement in the second half.


Citizens continues to perform well despite the reduction in margin caused by the
further flattening of the US yield curve, and is making good progress on the
integration of Charter One. RBS Insurance has continued to grow its income, in
very competitive conditions in motor insurance, and has completed the
integration of Churchill. Ulster Bank has seen continued strong growth in good
market conditions.


Expenses


The Group continues to focus on efficiency, and it is pleasing that we have
maintained our low cost:income ratio while achieving strong growth in volumes
and investing across the Group to support current and future income growth. The
Group's cost:income ratio for 2005 as a whole (excluding acquisitions) is
expected to be similar to the first half.


Credit Quality and Provisions


Overall credit metrics are expected to have improved in 2005, with the total
charge for provisions representing a lower proportion of total loans and
advances. The total charge for provisions is expected to be in line with market
expectations.




In Retail Markets, the charge for provisions is expected to continue to reflect
the seasoning of unsecured lending which grew strongly in recent years, together
with very low provisions on the growing mortgage balances. There are signs that
the increase in unsecured personal lending arrears may be levelling off, but it
is too early to conclude that arrears have peaked. Small business credit quality
remains stable. In Corporate Banking and Financial Markets, credit conditions
remain benign and it is expected that CBFM credit metrics for 2005 will show an
improvement from 2004.


Integration Activity


The integration of Churchill was completed successfully in September 2005, ahead
of schedule. It has delivered the expected transaction benefits, and it is
expected that Churchill's profit in 2005 will be more than double its profit in
2002, its last year before acquisition. The integrations of First Active and
Charter One remain fully on track.


Capital


As indicated in August, the Group's Tier 1 capital ratio is expected to exceed
7% at the end of 2005, reflecting the Group's continuing strong capital
generation. During 2005 total risk-weighted assets have maintained the good
underlying growth trend achieved over recent years and, while there was an
above-trend spike in risk-weighted assets at 30 June, there is not expected to
be a similar phenomenon at the end of the year.






Sir Fred Goodwin, Group Chief Executive, commented: 'Whilst market conditions in
the UK have clearly changed during 2005, it is pleasing that as a result of the
diversity of our income streams, the Group expects to be able to continue to
deliver good results and strong financial metrics for the year.'




CONTACTS

Sir Fred Goodwin      Group Chief Executive                  0131 523 2203
Fred Watt             Group Finance Director                 0131 523 2028
Richard O'Connor      Head of Investor Relations             0207 672 1758
For media enquiries
Howard Moody          Group Director, Communications         0131 523 2056
Carolyn McAdam        Head of Media Relations                0131 523 2055



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 RBS'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. These factors risks and uncertainties are discussed in
RBS's SEC filings, including, but not limited to, RBS's report on Form 6-K
containing this announcement and certain sections of RBS's Annual Report on Form
20-F. Information in this announcement of the price at which investments have
been bought or sold in the past or the yield on investments cannot be relied
upon as a guide to future performance. RBS assumes no responsibility to update
any of the forward looking statements contained in this announcement.


                      This information is provided by RNS
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