Trading Statement

Royal Bank of Scotland Group PLC
09 December 2004

The Royal Bank of Scotland Group plc

Pre-close Trading Update

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 2004.
This statement sets out the information that will be covered in those
discussions.

RBS has continued to make good progress in 2004. Key features of its annual
results, which will be released on 24 February 2005, are expected to include
strong income growth (both organic and from acquisitions) across a broad mix of
businesses, improved efficiency and continued improvements in credit metrics.
Consequently, the Group is confident of meeting market expectations.

Income and Margins

RBS has maintained strong momentum in organic income growth in the second half
of the year, supported by continued good growth in loans and deposits, stable
interest margins and good growth in non-interest income. Strong growth in income
has been achieved despite the impact of US dollar weakness.

The Group has continued to achieve good growth in assets, including a sustained
strong performance in small and mid-corporate loans, some recovery in demand for
large corporate loans and continued growth in consumer lending, particularly
mortgages. In UK consumer lending, there have been some signs of a modest easing
in the rate of growth in unsecured lending and, more recently, in mortgages. UK
consumer lending accounts for only 10% of Group income, so any slowdown would
have minimal impact on our overall income.

Deposit balances have continued to grow across the Group, with particularly good
growth in corporate volumes.

Margins are expected to be in line with guidance given in August. As previously
indicated, the Group net interest margin is expected to be a few basis points
lower than last year as a result of the inclusion of First Active and the
business mix impact of particularly strong growth in mortgages and rental
assets.

Non-interest income has continued to reflect strong growth across all our
activities, including credit cards, general insurance and money transmission.
Dealing profits continue to show positive momentum, reflecting higher customer
volumes, but, as in the first half, their growth is expected to be less than for
income growth across the Group as a whole.



Expenses

The Group remains focused on improving its efficiency. Expenses have increased
to support higher business volumes, and the Group continues to invest in
initiatives that will enhance its customer service capabilities and improve
efficiency in the future. Excluding acquisitions, the Group is on track to
achieve a small improvement in the cost:income ratio in the second half of 2004
compared to the first half, with a further improvement anticipated in 2005 as
the Group's efficiency programme begins to have a positive impact on the cost:
income ratio.

Credit Quality and Provisions

Credit quality remains strong. Credit metrics continue to improve overall, due
principally to further improvements in Corporate Banking. Retail Banking
provisions are expected to reflect the seasoning of the NatWest loan portfolio
which we anticipated in our interim results presentation.

Acquisitions and Disposals

The performance of the businesses which we acquired in 2003 and 2004 continues
to be good. They are contributing to the overall growth of the Group, and all
integrations are fully on track.

The acquisition of Charter One Financial Inc, announced on 4 May 2004, was
completed on 31 August 2004. The performance of the business continues to be
good. The integration of Charter One, and the expansion of the franchise into
the small business and mid-corporate sectors, are both progressing well. The
balance sheet repositioning of Charter One to reduce interest rate risk has been
successfully implemented, in line with the plans outlined at the time of the
announcement of the acquisition.

Change of Accounting Policy

The Group plans to adopt Financial Reporting Standard 17 'Retirement Benefits'
('FRS 17') - the standard that replaces SSAP24 'Pension costs' ('SSAP24') - for
its 2004 results. As the measurement principles in FRS 17 are similar to those
in the equivalent international accounting standard (IAS 19 'Employee Benefits')
the change in policy means that we will reflect the cost of pensions in 2004 on
a basis that is consistent with the treatment to be applied from 1 January 2005
under International Financial Reporting Standards.

The effect on comparative periods of adopting FRS 17 is shown in

Appendix 1. The charge for pension costs in the first half of 2004 was
comparable to the charge that results from the adoption of FRS 17. Consequently
there is no change to the reported profit before tax for that period. Although
shareholders' funds are reduced, the adoption of FRS 17 has no effect on the
Group's regulatory capital.



International Financial Reporting Standards (IFRS)

The Group's annual and interim accounts for 2005 will be prepared in accordance
with IFRS. The Group's conversion project has progressed well and the Group is
planning to issue its 2004 results restated to IFRS in the second quarter of
2005.

The precise effect of the application of IFRS to the 2004 results will depend on
the full year figures and the balance sheet position at the end of the year. In
addition, due to the delay in the issuance of IAS 39, uncertainties remain as to
its detailed interpretation and implementation.

We have, however, attempted to quantify the impact of the move to IFRS as
applied to our 2004 results and currently estimate that it will lead to a small
reduction (of between 2% and 3%) in the Group's adjusted earnings per share
(before goodwill amortisation and integration costs) for the year. Basic
earnings per share are estimated to increase by more than 10%, principally as a
result of goodwill no longer being amortised.

An analysis of the indicative effect of IFRS on earnings is shown in

Appendix 2.

Capital

Capital ratios remain strong. Our Tier 1 capital ratio at 31 December 2004 is
expected to be towards the top end of our target range of 6.5% to 7.0%.

The adoption of FRS 17 has no effect on the Group's regulatory capital.

The move to IFRS is expected to lead to a small reduction (currently expected to
be in the range of 10 to 20 basis points) in the Group's Tier 1 capital ratio at
31 December 2004.

An analysis of the indicative effect of IFRS on Tier 1 capital ratio is shown in
Appendix 3.



Sir Fred Goodwin, Group Chief Executive, commented:

'It is pleasing that our results continue to show good momentum across our broad
range of businesses, driven both organically and through acquisitions. Our
results are expected to show a picture of financial strength across all our
businesses, whether reported under UK GAAP or following the application of
International Financial Reporting Standards.'



Contacts

Sir Fred Goodwin       Group Chief Executive          0131 523 2003

Fred Watt              Group Finance Director         0131 523 2028

Richard O'Connor       Head of Investor Relations     0131 523 5103

0207 672 1758

For media enquiries:

Howard Moody          Group Director, Communications  0131 523 2056

The Royal Bank of Scotland Group plc

Pre-close Trading Update

Appendix 1

Impact of implementation of FRS 17 (pension costs)

                                                                      H1 2004    H1 2003     FY 2003 
                                                                          £ m        £ m         £ m 
                    Income (Note 1)                                                                  

                                           as previously reported     10,940      9,080      19,229  

                                           as restated                10,964      9,106      19,281  

                                           Change                         24         26         52   

                    Pension costs                                                                    

                                           as previously reported        185        134         273  

                                           as restated                   209        202         408  

                                           Change                        (24)       (68)       (135) 

                    Profit before tax                                                                

                                           as previously reported      3,381      2,896       6,159  

                                           as restated                 3,381      2,854       6,076  

                                           Change                          -        (42)        (83) 

                    Shareholders' funds                                                              

                                           as previously reported     32,408     28,614      28,099  

                                           as restated                30,407     26,605      26,098  

                                           Change (Note 2)            (2,001)    (2,009)     (2,001) 

Notes:

 1. Under FRS 17 the expected return on pension scheme assets less the interest
    on scheme liabilities is credited to other finance income.

 2. The change in shareholders' funds is consistent with disclosures relating to
    FRS 17 previously included in our Report & Accounts for 2003 and for 2002.

 3. Changes shown above as a result of implementing FRS 17 will be reported in
    Central Items in our restated results.

The Royal Bank of Scotland Group plc

Pre-close Trading Update

Appendix 2

IFRS - Indicative Impact on 2004 Earnings

The following table sets out the Group's estimates of the effect of IFRS as
applied to its 2004 earnings. All amounts are indicative.

                            Capital instruments   Goodwill     Software capitalisation              All other   Total 
                                        Note 2       Note 3                    Note 4    adjustments Note 5           
                                            £m           £m                        £m                     £m       £m 

  Income                                 (400)            -                         -                  (100)          

  Expenses                                   -            -                         -                  (150)          

  Operating profit                       (400)            -                         -                  (250)          

  Integration costs                          -            -                     (250)                      -          

  Goodwill                                   -          900                         -                      -          

  Profit before tax                      (400)          900                     (250)                  (250)          

  Tax                                       50            -                       100                    100          

  Preference dividends                                                                                                
  and minorities                           350            -                         -                      -          

  Basic earnings                             -          900                     (150)                  (150)      600 

  Adjusted earnings                                                                                                   
  (before goodwill and                                                                                                
  integration costs)                         -            -                                            (150)    (150)   
                                                                      
                                            

Notes:

 1. Amounts shown are indicative only at this stage and are rounded to the
    nearest £50m. They include the estimated effect of applying IAS 32 and IAS
    39 even though these standards are effective only for 2005 and there is no
    requirement to show comparative information.

 2. Under IFRS (IAS 32), certain capital instruments that are classified as
    preference shares or non-equity minority interests under UK GAAP will be
    classified as debt. Their coupons will be included in interest payable.
    There is no effect on their regulatory capital treatment.

 3. Under UK GAAP the Group currently amortises goodwill over its estimated
    useful economic life. IFRS 3 'Business Combinations' does not permit
    amortisation of acquired goodwill. It must be measured at cost less any
    impairment losses and tested at least annually for impairment.

    The Royal Bank of Scotland Group plc

    Pre-close Trading Update

    Appendix 2

    IFRS - Indicative Impact on 2004 Earnings

 4. Under UK GAAP software development costs relating to the NatWest integration
    were written off as incurred and included in integration costs. Under IFRS
    these costs are capitalised and amortised over their useful life, typically
    3 years. As the software will substantially be written off by the end of
    2005, its amortisation will be negligible thereafter.

 5. Other adjustments are principally: effective interest rate (IAS 39), leasing
    (IAS 17), loan impairment (IAS 39), and share-based payments (IFRS 2).

 6. The table above does not include the grossing-up of life assurance income,
    expenses and claims which under current GAAP are reported as a single item
    in income. The grossing-up, which has no impact on profit before tax and
    regulatory capital, will be reflected in our 2005 accounts.

 7. The introduction of IFRS will have a significant effect on the Group's
    balance sheet mainly through a gross-up of assets and liabilities on
    application of the stricter netting criteria in IAS 32 and additional assets
    and liabilities from the consolidation of certain SPVs, principally the
    group commercial paper conduits. This is likely to result in an increase in
    balance sheet footings of around £100bn. This change will have no impact on
    the Group's capital ratios.

 8. IFRS will also result in equity volatility that does not arise under current
    GAAP as unrealised gains and losses on available-for-sale securities and
    derivatives in cash flow hedges are taken directly to reserves. Regulatory
    capital will be unaffected by such gains and losses (except those arising on
    any available-for-sale equity shares).

The Royal Bank of Scotland Group plc

Pre-close Trading Update

Appendix 3

IFRS - Indicative Effect on Tier 1 Capital Ratio

The estimated effect of implementation of IFRS on our Tier 1 capital ratio at 31
December 2004 can be summarised as follows:


                         Effect on Tier 1 capital ratio
                                 (basis points)

Final dividend (Note 1)                30

IFRS transition adjustments       (30) - (40)

Pension scheme deficit               (10)

Overall effect on Tier 1 capital  (10) - (20)



Notes:

1. Based on the final dividend for 2003


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.


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