FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of December 2005
Commission File Number: 001-10306
The Royal Bank of Scotland Group plc
Business House F, Level 2
RBS, Gogarburn, P O Box 1000
Edinburgh EH12 1HQ, DEPOT CODE: 045
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
| Form 20-F X | Form 40-F |
| Yes | No X |
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.
END
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date:08 December 2005
| THE ROYAL BANK OF SCOTLAND GROUP plc (Registrant) |
| By: | /s/ H Campbell |
| Name: Title: |
H Campbell Head of Group Secretariat |