THE ROYAL BANK OF SCOTLAND GROUP plc

• Pre-tax loss of £691 million after credit market write-downs of £5.9 billion

• Underlying profit* of £5.1 billion, down 3%

• Capital ratios ahead of plan on a proportional consolidated basis:

• Core Tier 1 - 5.7%

• Tier 1 - 8.6%

• Total - 13.1%

• GBM balance sheet deleveraged by £157 billion since March**

• ABN AMRO integration ahead of plan

• Adjusted earnings per ordinary share down 10% to 21.3p

• Cost:income ratio unchanged at 48.2%

• Adjusted net interest margin improved slightly to 2.02%

• Loss before tax of £692 million

• Basic earnings per ordinary share (6.6p)

• Core Tier 1 capital ratio 6.7%

• Tier 1 capital ratio 9.1%

*profit before tax, credit market write-downs and one-off items, amortisation of purchased intangibles,

integration costs and share of shared assets.

**reduction in third party assets, excluding derivatives

THE ROYAL BANK OF SCOTLAND GROUP plc

Total income (1)                                                                    16,835     17,076         (241)           33,564

Operating expenses (2)                                                     8,285         8,403          (118)          16,618

Impairment losses                                               1,479            936           543            2,104

Underlying profit (3)                                                              5,144         5,322         (178)          10,314

Credit market write-downs and one-off items          5,113                7        5,106            1,026

Purchased intangibles amortisation                        182               43            139              124

Integration costs                                                   316               55            261              108

(Loss)/profit before tax                                          (691)          5,115       (5,806)           8,962

For basis of preparation of pro forma results see page 49. Reconciliations from statutory to pro forma

data are provided in Appendix 1.

(1) excluding credit market write-downs and one-off items and share of shared assets.

"The first half of 2008 has been as difficult an operating environment as we have encountered for

some time, presenting both general and specific challenges to RBS. The results we have published

today demonstrate progress in a number of important areas, and it is all the more unsatisfactory,

therefore, that they record a loss as a result of our credit market write-downs. We are determined to

ensure that the inherent strengths of the Group’s diverse business model are not obscured in this way

again."

THE ROYAL BANK OF SCOTLAND GROUP plc

Total income                                                            13,729    14,690      (961)        30,366

Operating expenses (1)                                                              10,571     6,396     4,175        13,942

Impairment losses                                                       1,661       871        790          1,968

The Group’s results for the first half of 2008 have been seriously affected by the impact of

unprecedented market conditions on a number of our business lines. It has been a chastening

experience and reporting a pre-tax loss of £691 million is something I and my colleagues regret very

much. This loss is a consequence of previously signalled write-downs on credit market exposures

amounting to £5.9 billion. In response to these new market conditions we moved decisively to

strengthen our capital position materially. In so doing we are acutely aware that we drew heavily on

our shareholders for financial support and we recognise that we must now deliver a level of

performance that meets their expectations for the company and restores value to our shares. We are

determined to do so, and this is our focus.

This is the first occasion on which we have presented results in the new Group structure announced in

February 2008, and our strategic pursuit of earnings diversification is evident in the underlying

numbers. The earnings performance of our businesses has been resilient, and we have made

considerable progress on the separation and integration of ABN AMRO. Excluding the write-downs

and other one-off items, the Group’s income totalled £16,835 million, down 1%, and underlying profit

declined by 3% to £5,144 million.

Underlying net interest margin improved slightly to 2.02%, as we have begun to take advantage of the

increased risk premia available in most markets. Operating expenses have been reduced by 1% to

£8,285 million, leaving our cost:income ratio flat at 48.2%.

We have achieved a good performance in UK Retail & Commercial Banking, reinforcing our leading

market positions with, for example, 12% growth in personal savings and 10% in mortgage balances.

We have generated good growth in our newer markets in Asia, where deposits are up 34%, and in the

Gulf, while results from our newly created Global Transaction Services division have reinforced our

confidence that this business will provide us with a very strong platform from which to broaden our

services to our clients globally. RBS Insurance has also performed well, with contribution recovering

strongly as claims fell from the high flood-affected levels recorded in 2007.

Clearly, market conditions have been difficult for our US Retail and Commercial Banking division,

despite which we have achieved positive net interest income growth, reflecting a focus on disciplined

management of our deposit base, as well as good growth in US commercial lending, up 13%.

Global Banking & Markets has been affected by credit market conditions both through the write-downs

incurred on some of its positions and through subdued volumes of activity, for example in

securitisation. In our rates, currencies and local markets business, however, we have achieved

excellent growth with income up by 87%, and we have significantly enhanced our commodities

platform through our joint venture with Sempra.

Impairments increased to £1,479 million. While we have as yet seen only a modest deterioration in

corporate and commercial credit metrics, we are keeping in close contact with our customers and

continue to monitor early indicators of credit stress vigilantly. In a selected number of segments that

now offer more attractive risk-adjusted returns, we have taken the opportunity to increase lending

volumes.

announced in April, offset by an £812 million reduction in the carrying value of own debt held at fair

value. We have been actively reducing our credit market portfolio, disposing of a number of holdings

at prices that have often been higher than we had estimated in April. We reduced our leveraged

finance portfolio from £14.5 billion at the end of 2007 to £10.8 billion at 30 June, and in July sold

another £1.25 billion of leveraged loans. While these leveraged disposals have been at better prices

than we had assumed in April, we have increased the credit valuation adjustment on our exposures to

monoline insurers as credit spreads have widened.

The credit market write-downs are the subject of detailed additional disclosure which we are

publishing today in line with the guidance issued by the Financial Stability Forum and our regulators.

These can be found at Appendix 2.

The process of separating the ABN AMRO businesses and transferring them to their ultimate owners

is proceeding smoothly. Asset Management and Banca Antonveneta passed successfully to their new

owners during the first half while the transfer of Banco Real and certain other businesses to Santander

concluded last month. We expect to complete the transfer of Private Clients to Fortis in the first half of

2009 and the remainder of the Netherlands activities will follow in the second half of 2009. Most

shared assets have already been dealt with, leaving only some small private equity holdings and the

Saudi Hollandi stake.

As announced in February, we have identified additional cost savings and revenue benefits from the

integration of ABN AMRO over and above those we originally anticipated. Our forecast is now for

integration benefits totalling €2.3 billion annually (£1.6 billion) in 2010, almost four times the underlying

profit before tax achieved in 2007 by the businesses we have acquired.

We are currently ahead of schedule in realising those benefits, with the amounts delivered so far

running at almost twice what we anticipated at this early stage of the integration process. In the six

months to June we have made cost savings ranging from headcount reductions to economies as

mundane as cutting the price paid for printer cartridges. Together, these savings have contributed

£135 million pre-tax profit to our first half results. In addition, we achieved £57 million of revenue

synergies within our enlarged business in the first half, and now have concrete evidence from a

stream of new business that we are achieving real gains from our broader footprint and product range.

The trading environment for credit markets and equities is currently dislocated, but the strategic

rationale for the acquisition remains intact. Our global client franchises and complementary product

strengths have materially enhanced Global Banking & Markets, while our Global Transaction Services

platform has given us the capability to cross-sell a much greater range of cash management and trade

finance services to our UK and global clients. We are also pleased with the international retail and

commercial businesses we have acquired, while the implementation of our manufacturing model on a

global basis presents us with the opportunity to reduce costs significantly.

From our review of market conditions, we concluded in April that we needed to materially strengthen

our capital base, and that to accomplish this we needed to conduct the rights issue which was

completed in June.

Our capital plan set a target for our capital ratios to exceed 5.0% for core Tier 1 and 7.5% for Tier 1 by

mid-year, on a proportional consolidated basis. In fact, our Core Tier 1 ratio at 30 June stood at 5.7%

and we are on course to achieve our target level, in excess of 6%, by the end of the year. Our Tier 1

ratio at 30 June was 8.6%, already in excess of our target minimum.

Our disposal plans are on track, and we have already announced agreements that contribute £1 billion

to capital, including the already-completed sales of Angel Trains and European Consumer Finance

and the recently announced agreement to sell our stake in Tesco Personal Finance to our joint

venture partner.

As we entered 2008 we experienced an increase in customer drawings on existing credit lines, which

increased in the first quarter. We have, however, taken decisive action to deleverage our business,

particularly in GBM, where we have reduced third party assets, excluding derivatives, by £108 billion

since the end of 2007. We have concentrated on improving the risk/return profile of our balance sheet

while continuing to support our customers. We will continue to make further reductions in leverage

during the second half.

The Board believes, as we stated in April, that it is prudent to issue new shares by way of a

capitalisation of reserves, instead of paying an interim dividend. We have decided on a capitalisation

issue of 1 new ordinary share for every 40 shares held, which is in line with last year's interim

dividend. We have established a share-dealing facility that will enable eligible shareholders to sell up

to 250 shares, including new shares from the capitalisation issue, free of charge.

It remains the Board’s intention that the 2008 final dividend will be paid in cash.

Our overall credit portfolio remains resilient, with a slight reduction in impairments in UK Retail &

Commercial Banking but an increase in impairments, from a low base, in both GBM and US Retail &

Commercial Banking. We are, however, anticipating that the credit environment will become more

challenging, and are positioning ourselves accordingly.

We have increased our impairment charge by £543 million to £1,479 million, which on an annualised

basis represents 0.46% of loans and advances. For the Group as a whole, non-performing and

potential problem loans at 30 June represented 1.47% of loans and advances, very slightly lower than

at the end of 2007. Our provision balance at the end of June totalled £5.0 billion, covering 56% of

non-performing loans.

Within the UK, we have already seen some increased strains particularly among small business

clients, but this has been offset in the first half by a further reduction in personal unsecured losses, as

a result of our conservative approach to this segment in recent years. The US has seen somewhat

higher delinquencies in its core mortgage and home equity book, but the deterioration in credit quality

has been most marked, as we have reported before, in a specific home equity portfolio sourced from

other originators. This activity has been shut down and the book is in run-off. The remainder of the

Citizens book is of much stronger credit quality, with an average loan to value ratio of 64% on

residential property. Commercial credit quality remains stable.

conditions in this sector in some countries, our portfolio remains well diversified, both by geography

and by type of development, with only 3% of our UK lending advanced at loan to value ratios above

85%. We have for several years maintained strict limits on lending for speculative developments, and

in our UK book only 1% of commitments secured on commercial property is for speculative

development.

Our UK mortgage portfolio also remains strong, with an average LTV of 66% on new business and of

49% on our entire book. Impairments remain negligible, representing 0.04% of UK mortgage

balances. We have never been prominent in the buy-to-let segment, and this category represents, as

we stated in June, only 1% of our UK loan book, with an average LTV of 56%.

The difficult conditions in the financial markets look set to be compounded by a deteriorating economic

outlook, with consensus forecasts pointing to slowing growth in many countries. In recognition of this

our main priority, and indeed our main challenge, is to position our businesses to enable them to

remain supportive of our customers whilst operating within a risk appetite appropriate to market

conditions.

Whilst the dislocation of global financial markets which began in 2007 makes this task more complex,

it also has the effect of increasing the risk premium available on most business lines. We now have

many new products and services to offer to our enlarged customer base, and these provide us with

opportunities for income growth, whilst the synergies arising from the integration of the newly acquired

businesses promise meaningful efficiency gains.