Subsidiary Results

Royal Bank of Scotland Group PLC 07 August 2002 The Royal Bank of Scotland Group plc is pleased to attach a copy of the results of Citizens Financial Group, Inc., its U.S. banking subsidiary. The financial information contained in the attached release has been prepared in accordance with accounting principles generally accepted in the United States of America ('U.S. GAAP'). Citizens' operating earnings before taxation, amortization of goodwill and core deposit intangible and their one-time costs of their acquisitions and other one time costs for the six-months ended June 30, 2002 based on U.K. GAAP and U.S. GAAP were as follows: $ In Millions Six-Months Ended June 30 2002 2001 U.K. GAAP $554 $336 U.S. GAAP $520 $337 07 August 2002 Contact: Fred Watt Group Finance Director 020 7427 9760 0131 523 2028 Grahame Whitehead Deputy Group Finance Director 020 7427 9760 0131 523 2970 Heather Campion Corporate Affairs, Citizens 001 617 725 5825 Financial Citizens reports record growth and earnings Cash operating earnings increase 55% PROVIDENCE, RI - Citizens Financial Group, Inc. ('Citizens') today reported record cash operating earnings of $343 million for the six-month period ended June 30, 2002, up 55% from $221 million for the comparable prior year period. The results for the six months ended June 30, 2002 include the purchase of the retail, small business and certain middle market commercial banking businesses of Mellon Financial Corporation on December 1, 2001. On June 13, 2002 Citizens announced a definitive agreement under which Citizens will acquire Medford Bancorp, Inc., the parent company of Medford Savings Bank which is located in eastern Massachusetts and has total assets of $1.4 billion. This transaction is subject to approval by regulatory authorities and Medford Bancorp, Inc. shareholders and is expected to be completed in the fourth quarter of 2002. Cash operating earnings exclude the amortization of intangible assets related to various acquisitions, including goodwill and core deposit intangibles, one-time merger and other costs and the cumulative effect of accounting change. This reporting is consistent with Citizens' parent, The Royal Bank of Scotland Group plc. At June 30, 2002, Citizens' total assets were $55.3 billion compared with $32.4 billion at June 30, 2001. The purchase from Mellon Financial Corporation added assets of $17.5 billion. Citizens had strong year over year organic loan and deposit growth in New England. New England deposits increased 14%, or $3.2 billion; loans and leases, excluding consumer mortgages, increased 7%, or $1.2 billion. 'Given the current economic environment, Citizens is particularly proud of our strong performance this period,' said Lawrence K. Fish, Chairman, President and CEO of Citizens Financial Group, Inc. 'We are reporting record profits and strong organic growth during the first half of 2002. In the mid-Atlantic, our acquisition of Mellon Bank's retail, small and certain middle market businesses is on track to deliver the financial performance predicted. Mellon's customers and the communities throughout the mid-Atlantic have embraced and supported Citizens. Our New England franchise continues to have strong organic growth,' Fish said. 'With our agreement to acquire Medford Savings Bank, subject to approval by Medford shareholders and regulators, Citizens is poised to continue to provide ever greater convenience to our customers in New England. 'Last spring, we signed agreements to open offices in Stop & Shop supermarkets in Rhode Island and Massachusetts. In the course of the last 13 months we have opened 74 of these full-service branches greatly expanding our customer reach and convenience in New England,' Fish said. Net interest income increased $372 million, or 69%, for the six-month period ended June 30, 2002, primarily due to the impact of the Mellon transaction and strong organic loan and deposit growth. Noninterest income increased $109 million, or 50%, for the six-month period ended June 30, 2002. In addition to the aforementioned impact of the Mellon transaction, the growth in noninterest income is being driven by strong growth in Citizens major business lines. Noninterest operating expense, which excludes the impact of one-time merger and other costs and the amortization of goodwill and core deposit intangible, was $664 million for the six-month period ended June 2002, a $284 million increase over the comparable prior year period. Citizens also recorded pre-tax costs for amortization of goodwill and core deposit intangible of $40 million for the six-month period ended June 30, 2002 compared with $59 million for the six-month period ended June 30, 2001. Citizens recorded one-time merger and other costs of $107 million, $70 million after tax, during the period ended June 30, 2002 connected with the Mellon transaction. Including the impact of the one-time costs, amortization and cumulative effect of accounting change, net income was $245 million for the six-month period ended June 30, 2002 and $169 million for the comparable prior year period. Citizens Financial Group, Inc. is a $55.3 billion commercial bank holding company headquartered in Providence, RI. It operates as Citizens Bank in Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, Pennsylvania, and Rhode Island. Citizens is one of the 20 largest commercial banks in the United States. Citizens is wholly owned by The Royal Bank of Scotland Group plc. Combined, Citizens has 740 branches, 1,545 ATMs and more than 14,000 employees in seven states. For more information, please contact our website, citizensbank.com. CITIZENS FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited) SIX MONTHS ENDED JUNE 30 ----------------------- 2002 2001 -------- -------- (In Millions) Net interest income $ 910 $ 538 Provision for credit losses 53 39 -------- -------- Net interest income after provision for credit losses 857 499 -------- -------- Noninterest income 327 218 Noninterest expense Operating 664 380 Amortization of goodwill and core deposit intangible 40 59 -------- -------- 704 439 Total noninterest expense -------- -------- 480 278 Earnings before income taxes 165 110 Income taxes -------- -------- 315 168 Net income-operating - 1 Cumulative effect of accounting change, net of tax 70 - One-time merger and other costs, net of tax -------- -------- 245 169 Net income 98 52 Cash basis and one-time adjustment, net of tax -------- -------- $ 343 $ 221 Cash basis-operating earnings ===== ===== CITIZENS FINANCIAL GROUP, INC. CONSOLIDATED BALANCE SHEETS (unaudited) JUNE 30, --------------------- 2002 2001 ----------- ----------- (In Millions) Assets ------- Cash and due from banks $ 1,223 $ 803 Short-term investments 693 95 Securities 20,665 9,366 Loans and leases 26,823 18,743 426 301 Less: Allowance for possible credit losses ----------- ----------- 26,397 18,442 Net loans and leases ----------- --------- 4,187 1,929 Goodwill and core deposit intangible 2,134 1,727 Other assets ----------- ----------- $ 55,299 $ 32,362 ======= ======= Total assets Liabilities and Stockholder's Equity ----------------------------------------- Deposits $ 41,490 $ 23,235 Borrowed funds 6,271 5,383 Other liabilities 1,375 521 ----------- ----------- 49,136 29,139 Total liabilities ----------- ----------- 6,163 3,223 Stockholder's equity ----------- ----------- $ 55,299 $ 32,362 Total liabilities and stockholder's equity ======= ======= This information is provided by RNS The company news service from the London Stock Exchange

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