5th Jun 2007 07:00
Royal Bank of Scotland Group PLC05 June 2007 THE ROYAL BANK OF SCOTLAND GROUP PLC Pre-close Trading Update 5 June 2007 Introduction The Royal Bank of Scotland Group ('RBS') will be holding discussions withanalysts and investors ahead of its close period for the half year ending 30June 2007. This statement sets out the information that will be covered in thosediscussions. Comments relate to expected results for the half year ending 30June 2007, unless otherwise stated. Summary The Group continues to perform well in 2007 and we expect the rate of underlyingearnings growth in the first six months of the year to be slightly higher thanthat implied by the consensus earnings forecast for the full year*. Highlightsof our interim results for 2007 are expected to include good organic growth inincome, disciplined expense control, measured investment in faster-growingbusinesses and continued strong credit metrics. Group The Group is delivering good growth in total income in 2007, with non-interestincome continuing to grow faster than net interest income. Loan volumes remainstrong, though we have maintained our conservative approach towards unsecuredpersonal lending, while deposit volumes also continue to grow strongly. Margintrends remain in line with previous guidance. As expected, reported incomegrowth will be slightly affected by the weakness of the US dollar. The Group expects to report a cost:income ratio slightly lower than for the fullyear 2006. Expenses continue to be tightly managed, and we have achieved furtherproductivity gains from our manufacturing platform while investing in a numberof high growth business opportunities. Overall credit metrics remain strong, with a benign corporate credit environmentand a modest reduction in UK retail impairment losses. Total impairment lossesare expected to represent a slightly lower proportion of total loans andadvances. Returns on equity, and capital generation, remain strong. The Tier 1 capitalratio is expected to be stable in the middle of the 7% to 8% range. \* The market consensus forecast for 2007 adjusted earnings per ordinary share is72.1p. Divisions Divisional performances remain consistent with the trends displayed in 2006.Particular features are highlighted below. Corporate Markets continues to perform well across its activities, withcontinuing strength in Global Banking and Markets and sustained good growth inUK Corporate Banking. We are continuing to invest in expanding our geographicalfootprint, product range and customer relationships. Our risk profile remainsconservative and the corporate credit environment is stable. Retail Markets is expected to show Wealth Management growing strongly and goodgrowth in business banking, mortgages, savings and investment products. We havemaintained our cautious approach to unsecured personal lending. Credit qualityis improving, and we expect a modest reduction in impairment losses. Costsremain tightly controlled. Ulster Bank continues to deliver good growth across the island of Ireland inboth business and personal lending. We continue to invest in the expansion ofour footprint and in the broadening of our product range. Citizens continues to diversify its sources of income and has achieved goodgrowth in its corporate and commercial activities, as well as in home equitylending. US retail deposit and lending volumes remain subdued but margins havestabilised. Costs are under tight control and underlying credit metrics remainstrong, reflecting the high quality of our portfolio. RBS Insurance continues to focus on more profitable customers acquired mainlythrough its direct brands. Selective price increases have been introduced andRBS Insurance maintains its disciplined approach to risk selection.International and commercial activities continue to grow strongly. Expenses andclaims remain rigorously managed. Sir Fred Goodwin, Group Chief Executive, commented: "We expect that our first half results will again demonstrate the Group'sability to deliver profitable organic growth, building on the many opportunitieswith attractive risk and reward characteristics that we have established in theUK and internationally. I am confident that the Group will continue tocapitalise on these opportunities and deliver another strong performance in2007." 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 enquiriesAndrew McLaughlin Director, Economic and Corporate Affairs 0131 626 3868Carolyn McAdam Head of Media Relations 0131 523 2055 Unless otherwise stated, comments on trends contained in this statement refer tothe results for the half year ending 30 June 2007 compared with the equivalentperiod in 2006. 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