Trading Statement

Royal Bank of Scotland Group PLC
06 December 2007


                      THE ROYAL BANK OF SCOTLAND GROUP PLC

                            Pre-close Trading Update


6 December 2007


Highlights


  • RBS (excluding ABN AMRO) operating profit and earnings per share in 2007
    expected to be well ahead of market consensus*

  • Group capital ratios at end 2007 expected to be comfortably within our
    target ranges of 7% to 8% for Tier 1 capital and 11% to 12% for total
    capital

  • Credit market deterioration in the second half is expected to result in
    write-downs of £950 million

  • Gains on planned operating disposals have benefited from strong investor
    demand

  • Excluding the net positive impact of these write-downs and gains,
    results are still expected to be comfortably ahead of consensus

  • ABN AMRO Group adjusted earnings consistent with previous guidance

  • Integration of ABN AMRO progressing well. Transaction benefits, return
    on investment and earnings accretion slightly higher than forecast




Sir Fred Goodwin, Group Chief Executive, said:


'Rarely have the diversity and quality of the Group's business platform been
more important in enabling us to deliver consistently strong performance.
Although some of our businesses have been affected by the challenging market
conditions, the Group's underlying earnings trajectory has remained
comparatively unaffected.


The integration of ABN AMRO is off to a promising start, and we now anticipate
better financial returns than we envisaged at the time of the bid. More
importantly, the increased exposure to many high growth economies that ABN AMRO
brings us seems more attractive and relevant than ever.'


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
2007. This statement sets out the information that will be covered in those
discussions. Comments relate to expected results for the full year ending 31
December 2007, unless otherwise stated.


RBS excluding ABN AMRO


RBS has continued to perform well in 2007, with operating profit and earnings
per share expected to be well ahead of the market consensus forecast. Results
have been restrained by credit market deterioration in the second half, which is
expected to result in write-downs in income of approximately £950 million. These
include write-downs of approximately £950 million on our exposures to US
sub-prime mortgage markets (see Appendix) and £250 million on our leveraged
finance portfolio, partially offset by a reduction of approximately £250 million
in the carrying value of our own debt carried at fair value. Results have been
aided by strong gains on planned realisations. Excluding the net positive impact
of the write-downs and gains, operating profit is still expected to be
comfortably ahead of the consensus forecast.


In achieving this robust underlying performance, the Group has benefited from
the diversity of its income streams and the strength of its franchises. The
Group is expected to deliver good organic growth in net interest income as a
result of strong growth in loans and advances and even stronger growth in
deposits from both personal and corporate customers. Group net interest margin
is expected to be slightly lower in 2007, in line with previous guidance.
Non-interest income, excluding the impact of the gains and write-downs
identified above, is expected to increase modestly in 2007 and to continue to
account for more than 60% of total income. Reported income growth for 2007 will
be adversely affected by the weakness of the US dollar relative to sterling.


Good expense discipline is expected to result in a further improvement in the
Group's cost:income ratio in 2007. This improvement reflects continuing
productivity gains in Manufacturing and good cost control in other divisions,
coupled with selective investment in faster-growing businesses.


Overall credit metrics remain strong, with improvements in both UK personal and
corporate impairments. At Citizens, impairment provisioning has stepped up to a
more normal level, reflecting the impact of the weakening US real estate market
in the second half on some elements of its portfolio. Group impairment losses
are expected to be flat as compared with 2006, and to fall as a percentage of
average loans and advances.



RBS Divisions


Global Banking & Markets' growth has been slowed by credit market conditions in
the second half, with write-downs on US sub-prime mortgage and leveraged finance
exposures mitigated by a gain on the sale of Southern Water. Excluding these
effects, GBM is expected to show good underlying growth in both income and
operating profit in 2007. GBM's strong customer franchises and diversification
by product and geography have enabled it to deliver excellent growth in many of
its businesses, including rates, currencies and project and export finance. It
continues to make very good progress in Europe and Asia and to make measured
investments in these regions.


UK Corporate Banking has reinforced its position as the UK's leading corporate
bank with another good performance in 2007, including strong growth in both
loans and advances and customer deposits. Overall, we have not seen any
deterioration in corporate credit quality.


Retail Markets has achieved good results, with strong growth in deposits and in
bancassurance sales. Wealth Management continues to deliver excellent growth,
both in the UK and internationally, particularly in Asia. We have maintained
good momentum in business banking, but have continued our cautious approach to
mortgages and direct personal unsecured lending. Credit quality has continued to
improve in personal unsecured lending and has remained stable in other areas.
Costs remain tightly controlled.


Ulster Bank has continued to perform well across the island of Ireland, with
strong growth in loans and advances, particularly business lending, and in
deposits. Credit quality has remained stable. Ulster Bank continues to invest in
its product and distribution capabilities, to support future growth.


Citizens has continued to diversify its product footprint, with good progress in
commercial banking and in its payments businesses. Margins have shown some
improvement but underlying business volumes have remained subdued, reflecting
difficult market conditions. Expenses remain under tight control. Impairment
provisioning has stepped up to a more normal level, reflecting the impact of the
weakening US real estate market in the second half on some elements of Citizens'
portfolio. Citizens' reported results will be affected by the weakness of the
dollar.


RBS Insurance continues to focus on selective underwriting of more profitable
business, acquired mainly through its direct brands. Results have been held back
by the impact of the unusually severe floods in June and July, partially
mitigated by the improving risk profile of our book.


Manufacturing continues to deliver good productivity gains in support of
business growth in our customer-facing divisions, while continuing to invest in
our property portfolio. Technology and operations costs remain tightly
controlled.



Capital and funding


RBS Group's capital ratios at the end of 2007 are expected to be comfortably
within our target ranges of 7% to 8% for Tier 1 capital and 11% to 12% for total
capital, as a result of strong profitability, continued focus on balance sheet
management and planned disposals.


We have experienced strong deposit growth in the second half and RBS's funding
and liquidity position remains strong. Investor demand for commercial paper
issued by RBS's conduits, which have no exposure to US residential mortgages,
remains strong.


ABN AMRO

ABN AMRO's adjusted** earnings for 2007 are expected to be consistent with the
guidance it issued on 17 September 2007. These results include write-downs on US
sub-prime mortgage exposures (see Appendix) which have now been valued using the
same approach as RBS.


The integration of ABN AMRO is progressing well. Since completion of the
acquisition, RBS has validated its plan and now expects to deliver transaction
benefits somewhat greater than anticipated in the offer for ABN AMRO announced
on 16 July 2007.


Based on RBS's revised forecasts for business growth and transaction benefits,
the acquisition of the ABN AMRO Businesses is now expected to lead to slightly
higher earnings accretion and return on investment than previously indicated.


Capital ratios remain in line with previous guidance, and ABN AMRO's funding and
liquidity position remains strong. Investor demand for commercial paper issued
by ABN AMRO's long-established conduits, less than 0.5% of whose assets relate
to US sub-prime residential mortgages, remains strong.


Accounting presentation


RBS statutory accounts for 2007 will consolidate 100% of ABN AMRO Group's
results for the period from 17 October 2007 to 31 December 2007, with the
interests of Fortis and Santander shown as minority interests. RBS also intends
to publish pro forma results incorporating the results of the ABN AMRO
Businesses to be acquired by RBS for the same period. Ahead of the publication
of its 2007 results, RBS expects to provide pro forma numbers for 2006 and
1H2007 on the basis of a revised reporting structure, and a divisional analysis
for the Group including the ABN AMRO Businesses. A further update on progress
with the ABN AMRO integration will be provided at the 2007 results presentation
on 28 February 2008.


Appendix: US sub-prime exposures


The Royal Bank of Scotland Group's Global Banking & Markets business (GBM) has a
leading position in structuring, distributing and trading asset-backed
securities (ABS). These activities include buying mortgage-backed securities,
including securities backed by US sub-prime mortgages, and repackaging them into
collateralised debt obligations (CDOs) for subsequent sale to investors. It
retains exposure to some of the super senior tranches of these CDOs. There is no
exposure to these instruments in the banking book.


At 30 November, GBM's exposure to these super senior tranches, net of hedges and
write-downs, totalled £1.1 billion to high grade CDOs which include commercial
loan collateral as well as prime and sub-prime mortgage collateral, and £1.3
billion to mezzanine CDOs based predominantly on residential mortgage
collateral. The CDOs are largely based on ABS issued between 2004 and the first
half of 2006. GBM also had under £1 billion of exposure to sub-prime mortgages
through a trading inventory of mortgage-backed securities and CDOs, and £0.1
billion through securitisation residuals. GBM has no exposure to Structured
Investment Vehicles (SIVs) or to SIV-Lites.


In the second half of 2007, rising mortgage delinquencies and expectations of
declining house prices in the US have led to a deterioration of the estimated
fair value of these exposures. Our valuations of the ABS CDO super senior
exposures take into consideration outputs from our proprietary model, market
data and prudent valuation adjustments. Our trading book exposures and residuals
are marked to market on the basis of direct prices, where available, or
observable market benchmarks, as detailed in the table below.



                                               Exposure net        Average price
                                              of hedges and      post write-down
                                                write-downs
                                             at 30 November
                                                       £m                    %
Super senior tranches of ABS CDOs
High grade CDOs                                     1,100                   90
Mezzanine CDOs                                      1,256                   70
CDO squared                                             0                    n/a
Sub-prime trading inventory
Investment grade                                      717                   89
Non-investment grade                                  218                   46
Residuals                                              86                   47



The resulting write-downs in income are expected to total approximately £950
million in the second half.


ABN AMRO


At 30 November, ABN AMRO had exposure of £1.7 billion to super senior tranches
of high grade ABS CDOs, net of hedges and write-downs, and no exposure to
mezzanine ABS CDOs. ABN AMRO also held a trading inventory of junior CDO
tranches and mortgage-backed securities totalling £0.05 billion, net of hedges
and write-downs. ABN AMRO has no exposure to SIVs or SIV-Lites.



                                               Exposure net        Average price
                                              of hedges and      post write-down
                                                write-downs
                                             at 30 November
                                                       £m                    %
Super senior tranches of ABS CDOs
High grade CDOs                                     1,667                   90
Mezzanine CDOs                                          0                    n/a
CDO squared                                             0                    n/a
Sub-prime trading inventory                            51                   26
Residuals                                               0                    n/a



Applying the same valuation methodology used by GBM, we expect to book
write-downs in income on ABN AMRO's exposure to US-mortgage related assets
totalling approximately £300 million in the second half.


These write-downs will be reflected in 2007 results for ABN AMRO but will not
affect the Group's earnings as they will be dealt with as part of the
acquisition accounting adjustments.


CONTACTS

Sir Fred Goodwin     Group Chief Executive                        0131 523 2203
Guy Whittaker        Group Finance Director                       0131 523 2028
Richard O'Connor     Head of Investor Relations                   0131 626 1014
                                                                  0207 672 1758

For media enquiries
Andrew McLaughlin    Director of Economic and Corporate Affairs   0131 626 3868
Carolyn McAdam       Head of Group Communications                 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, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. 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.
Forward-looking statements include, without limitation, statements typically
containing words such as 'intends', 'expects', 'anticipates', 'targets',
'plans', 'estimates' and words of similar import. Factors that could cause or
contribute to differences in current expectations include, but are not limited
to, legislative, fiscal and regulatory developments, competitive conditions,
technological developments, exchange rate fluctuations and general economic
conditions. These factors, risks and uncertainties are discussed in RBS's SEC
filings, including, but not limited to, RBS's Reports on Form 6-K containing
this announcement and certain sections of RBS's Annual Reports 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, whether as a
result of new information, future events or otherwise, except to the extent
legally required.


--------------------------

* The market consensus forecast, excluding ABN AMRO, is for 2007 profit before
tax, purchased intangibles amortisation and integration costs of £9,775 million,
and for adjusted earnings per share of 70.5p.


** Adjusted for gains on major disposals, restructuring charges/releases, the
provision for the DoJ investigation, transaction-related advisory fees, break
fee paid to Barclays, change of control costs, and excluding the 4th quarter
profit contribution of LaSalle. For further details of the adjustments please
refer to the ABN AMRO first half 2007 results press release of 30 July 2007.


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