6th Dec 2006 07:00
Royal Bank of Scotland Group PLC06 December 2006 THE ROYAL BANK OF SCOTLAND GROUP PLC Pre-close Trading Update 6 December 2006 Introduction The Royal Bank of Scotland Group ('RBS') will be holding discussions withanalysts and investors ahead of its close period for the year ending 31 December2006. This statement sets out the information that will be covered in thosediscussions. Summary RBS is performing well and our results for 2006 are expected to be slightlyahead of market consensus forecasts*. Highlights of the Group results for 2006are expected to include good organic growth in income, an improvement inefficiency, strong credit metrics and stable returns. Group The Group is maintaining good organic growth in total income in 2006,notwithstanding recent US dollar weakness. Non-interest income continues to growfaster than net interest income and is expected to account for more than 60% oftotal income. Net interest margin trends remain in line with previous guidanceunderpinned by balanced growth in loans and deposits. Productivity gains from our manufacturing platform allow continuing investmentfor the future, whilst delivering further improvement to the cost:income ratiofor the Group. Overall credit metrics are expected to have improved with total impairmentlosses representing a slightly lower proportion of total loans and advances. Returns on equity, and capital generation, remain strong. The Tier 1 capitalratio is expected to be in the middle of the 7% to 8% range and we anticipatecompleting our £1 billion share buyback by the year end. Strong growth in loanorigination is being complemented by the Group's increasing distributioncapabilities. Divisions Corporate Markets is achieving strong growth in income across its full range ofactivities, while continuing to invest in people and technology. Both theproportion of income from trading activities and our risk profile remain stable.We have made excellent progress in building a strong and sustainable position inGlobal Banking & Markets and have reinforced our leading position in UKCorporate Banking. The corporate credit environment remains favourable. Retail Markets is performing well, achieving good growth in income, particularlyfrom savings and bancassurance products. This, as well as stronger mortgagelending in the second half, has offset weaker demand for consumer credit. WealthManagement continues to perform strongly. Costs remain under tight control.Growth in unsecured impairment losses continues to moderate. Ulster Bank is delivering strong growth in income against a buoyant economicbackdrop, with strong lending and deposit volumes partially offset by tightermargins. Credit metrics remain stable. Citizens is growing loan and deposit volumes but the benefit is being largelyoffset by lower margins caused by the continuing impact of the flattening of theUS yield curve and a change in the mix of deposits. Underlying credit metricsremain stable, reflecting the overall quality of the portfolio. The weakeraverage US dollar exchange rate will also affect second half results in sterlingterms. RBS Insurance is maintaining a disciplined approach to pricing and is growingincome by concentrating on more profitable market segments. International motorand commercial policies continue to grow strongly. Claims inflation continues toimpact results, however RBS Insurance is increasing its prices in line with themarket, which should be reflected in our results in due course. Sir Fred Goodwin, Group Chief Executive, commented: "Our 2006 results will underscore the diversity of our income and inherentstrength of our business model. We expect to deliver profitable organic growthand improvements in key financial metrics, while continuing to invest in ourbusinesses and generating surplus capital. I believe these attributes will beevery bit as important in the year ahead as they have been in 2006." CONTACTS Sir Fred Goodwin Group Chief Executive 0131 523 2203Guy Whittaker Group Finance Director 0131 523 2028Richard O'Connor Head of Investor Relations 0131 626 1014 0207 672 1758 For media enquiries Howard Moody Group Director, Communications 0131 523 2056Carolyn McAdam Head of Media Relations 0131 523 2055 * Market consensus forecasts for 2006 profit before tax, purchased intangiblesamortisation and integration costs are £9,158 million, and adjusted earnings perordinary share of 190.7p. (Source: RBS Investor Relations, 5 December 06) This announcement contains forward looking statements, including such statementswithin the meaning of Section 27A of the US Securities Act of 1933 and Section21E of the Securities Exchange Act of 1934. These statements concern or mayaffect future matters, such as RBS's future economic results, business plans andstrategies, and are based upon the current expectations of the directors. Theyare subject to a number of risks and uncertainties that might cause actualresults and events to differ materially from the expectations expressed in theforward looking statements. Factors that could cause or contribute todifferences in current expectations include, but are not limited to, regulatorydevelopments, competitive conditions, technological developments and generaleconomic conditions. These factors, risks and uncertainties are discussed inRBS's SEC filings, including, but not limited to, RBS's report on Form 6-Kcontaining this announcement and certain sections of RBS's Annual Report on Form20-F. Information in this announcement of the price at which investments havebeen bought or sold in the past or the yield on investments cannot be reliedupon as a guide to future performance. RBS assumes no responsibility to updateany of the forward looking statements contained in this announcement. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RBS.L