#1Consistent Progress John Hourican CEO, Global Banking and Markets The Royal Bank of Scotland Group Deutsche Bank Financial Services Conference; 8th June 2011 RBS The Royal Bank of Scotland Group#2Important information RBS Certain sections in this presentation contain 'forward-looking statements' as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include the words 'expect', 'estimate', 'project', 'anticipate', 'believes', 'should', 'intend', 'plan', 'could', 'probability', 'risk', 'Value-at-Risk (VAR)', 'target', 'goal', 'objective', 'will', 'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or variations on such expressions. In particular, this presentation includes forward-looking statements relating, but not limited to: the Group's restructuring plans, capitalisation, portfolios, net interest margin, capital ratios, liquidity, risk weighted assets, return on equity (ROE), cost:income ratios, leverage and loan: deposit ratios, funding and risk profile; the Group's future financial performance; the level and extent of future impairments and write-downs; the protection provided by the Asset Protection Scheme (APS); and the Group's potential exposures to various types of market risks, such as interest rate risk, foreign exchange rate risk and commodity and equity price risk. These statements are based on current plans, estimates and projections, and are subject to inherent risks, uncertainties and other factors which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. For example, certain of the market risk disclosures are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have been estimated. Other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this presentation include, but are not limited to: the full nationalisation of the Group or other resolution procedures under the Banking Act 2009; the global economy and instability in the global financial markets, and their impact on the financial industry in general and on the Group in particular; the financial stability of other financial institutions, and the Group's counterparties and borrowers; the ability to complete restructurings on a timely basis, or at all, including the disposal of certain Non-Core assets and assets and businesses required as part of the EC State Aid restructuring plan; organisational restructuring; the ability to access sufficient funding to meet liquidity needs; cancellation, change or withdrawal of, or failure to renew, governmental support schemes; the extent of future write-downs and impairment charges caused by depressed asset valuations; the inability to hedge certain risks economically; costs or exposures borne by the Group arising out of the origination or sale of mortgages or mortgage-backed securities in the United States; the value and effectiveness of any credit protection purchased by the Group; unanticipated turbulence in interest rates, yield curves, foreign currency exchange rates, credit spreads, bond prices, commodity prices and equity prices; changes in the credit ratings of the Group; ineffective management of capital or changes to capital adequacy or liquidity requirements; changes to the valuation of financial instruments recorded at fair value; competition and consolidation in the banking sector; HM Treasury exercising influence over the operations of the Group; the ability of the Group to attract or retain senior management or other key employees; regulatory or legal changes (including those requiring any restructuring of the Group's operations) in the United Kingdom, the United States and other countries in which the Group operates or a change in United Kingdom Government policy; changes to regulatory requirements relating to capital and liquidity; changes to the monetary and interest rate policies of the Bank of England, the Board of Governors of the Federal Reserve System and other G7 central banks; impairments of goodwill; pension fund shortfalls; litigation and regulatory investigations; general operational risks; insurance claims; reputational risk; general geopolitical and economic conditions in the UK and in other countries in which the Group has significant business activities or investments, including the United States; the ability to achieve revenue benefits and cost savings from the integration of certain of RBS Holdings N.V.'s (formerly ABN AMRO Holding N.V.) businesses and assets; changes in UK and foreign laws, regulations, accounting standards and taxes, including changes in regulatory capital regulations and liquidity requirements; the recommendations made by the UK Independent Commission on Banking and their potential implications; the participation of the Group in the APS and the effect of the APS on the Group's financial and capital position; the ability to access the contingent capital arrangements with HM Treasury; the conversion of the B Shares in accordance with their terms; limitations on, or additional requirements imposed on, the Group's activities as a result of HM Treasury's investment in the Group; and the success of the Group in managing the risks involved in the foregoing. The forward-looking statements contained in this presentation speak only as of the date of this announcement, and the Group does not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The information, statements and opinions contained in this presentation do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of any offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments.#3Core Bank - a sustainable & balanced design A complementary group of businesses.... Retail & Commercial RBS well balanced by business mix and geography FY10 Core revenues by Division Retail Customers UK Retail UK Corporate Global Banking & Markets Global Corporate Clients Deposits Wealth SMES Governments Financial Institutions GBM Ulster Bank 32% Domestic Corporate US R&C GTS Market Funding with shared infrastructure... Shared vendor management & purchasing Shared property management Shared technology (e.g. systems, data centres) Shared operations (e.g. customer centres, processing) Ulster 4% US R&C 12% Internationally operating Shared branches R&C business 30% Citizens Ulster Bank Wealth UK UK Retail Corporate GTS GBM 1 Excluding Fair Value of Own Debt (FVOD), excluding RBS Insurance. Retail & Commercial 68% UK Retail 22% UK Corporate 16% Wealth 4% GTS 10%#4GBM: an important component of RBS Group RBS Balanced resources % of RBS Group, 2010 Focused on returns GBM Peers C:IR 56% 54% -82% Leverage Ratio 25x 19x-55x 68% 65% 82% ROE (Post Tax) 16.6% 13.1% 18.6% - £'bn 2009-2010 35% 32% 18% GBM Cumulative Equity Generated 1 6.6 Income RWAs Employees Retail & Commercial GBM 1 Cumulative annual post-tax Operating Profit (since 2009), excluding fair value of own debt#5A clear vision: 'partner of choice for our leading clients' XRBS RBS Global Banking & Markets Top 5 wholesale bank in chosen markets Fewer, deeper client relationships Clear product choices Global, focused on major hubs Financing and risk management-led "Flow engine❞ Leadership in fixed income Enhanced equity and advisory Tight risk, capital and funding control. ■Sustainable efficient platform New management team#6Consistent progress: a focused "core GBM" A more focused business FY07 "Old" Core FY103 Q1113 GBM GBM Income, £bn 9.11 6.7 7.9 2.4 Costs, £bn (5.8)2 (5.1) (4.4) (1.3) Profit, £bn 3.21 1.5 3.4 1.1 ROE, % 10.8% 10.4% 16.6% 20.8% Balance Sheet, £bn 873.8 617.3 396.7 423.3 People 24,100 20,900 18,700 19,800 Fewer, deeper client relationships 26,000+ Client base Corporates FI's ~5,000 35% 65% "Old GBM" Core GBM Distribution of Core Clients Optimised global footprint RBS 39 Presence locations 12 Exit countries Clear product choices Markets Rates Trading and Risk Management Mortgage Trading Credit Trading and Risk Management Local Markets FX Trading and Risk Management Short Term Markets & Financing Equities Trading and Financing Structuring Banking IG Bonds HY Bonds Non-Mortgage ABS Syndicate Loan Markets Corporate Finance Advisory Portfolio Management Coverage Cash Management and Trade Finance (via GTS) Non-core Structured credit trading Illiquid prop trading Illiquid structured derivatives Asset management Non-conforming ABS origination Real estate lending Asset finance Leveraged finance lending Project finance lending 1 Core + Non Core. 2 Source: GBM Finance (Core only, excluding Sempra). 3 Source: Published financials (Core only, excluding Sempra)#7Opportunity to leverage our core FICC franchise strength Markets revenues 2010 Bank A Bank B Bank C Bank D Bank E Bank F Bank G Bank H Note: excludes commodities, Equities (ex US and Japan) Source: RBS estimates Bank RBS The Royal Bank of Scottonal RBS Equities: already a Top 3 Structured Retail business Emerging Markets: leverage. global GTS platform and strong client flows Top 5 macro FICC franchise#8Revenues from a mix of businesses A strong position in Macro Fixed income GBM Revenues Q1 2010 - Q1 2011 Work still to do in Equities. RBS FICC & Equities Market Rankings1 £bn Banking 2.8 Equities 1.9 Currencies Credit Markets Rates 1.6 1.6 2.4 Rates Global FY 2009 Global FY 2010 Top 3 Top 3 FX Top 3 Top 3 Mortgage Trading Top 5 Top 3 Short Term Markets & Financing Тор 3 Top 5 Flow Credit Top 10 Top 10 Emerging Markets Top 10 Equities (ex US/Jpn) Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Outside Top 10 1 Source: Coalition / GBM estimates Outside Top 10 Outside Top 10#9A highly focused primary markets position RBS Global EMEA Americas APAC Market Vol Market Vol Market Vol Market Vol Period RBS Rank RBS %'Share RBS Rank RBS %'Share RBS Rank RBS %'Share RBS Rank RBS %'Share (USDb) (USDb) (USDb) (USDb) Q111 #11 1,555 3.6% #8 825 3.8% #10 663 3.4% #10 67 4.3% FY10 #10 5,153 3.9% #7 2,056 3.7% #10 2,858 4.0% #9 239 4.5% All DCM Q410 #10 1,112 3.9% #10 349 3.5% #10 694 4.0% #7 70 5.6% Bookrunners Q310 #9 1,362 4.5% #6 521 4.0% #10 776 4.8% #5 66 5.5% Q210 #10 1,050 3.2% #9 402 3.4% #11 617 3.0% #8 31 4.9% Q110 #10 1,628 3.9% #8 784 3.8% #10 771 4.1% #16 72 2.4% Q111 #6 347 5.7% #3 134 6.9% #10 193 4.9% #7 20 5.5% FY10 #6 1,137 5.4% #1 393 7.1% #9 681 4.4% #8 63 5.9% Corporate DCM Q410 #7 306 5.0% #3 90 6.3% #10 186 3.9% #3 30 8.5% Bookrunners Q310 #9 322 5.0% #2 96 7.5% #10 209 3.8% #10 17 4.6% Q210 #8 201 5.6% #2 78 8.2% #9 117 4.0% #13 6 2.6% Q110 #6 307 6.2% #3 129 6.9% #8 170 5.9% #16 9 2.3% Q111 #11 536 3.2% #10 373 3.4% #11 135 2.3% #7 29 4.5% FY10 #12 1,398 2.5% #12 934 2.6% #12 346 1.8% #12 118 3.7% FI DCM Q410 #14 270 1.9% #13 156 2.3% #18 80 0.5% #10 34 3.1% Bookrunners Q310 #11 380 2.7% #13 249 2.3% #8 98 2.9% #9 32 4.9% Q210 #9 253 3.4% #7 174 3.5% #10 68 2.7% #5 11 6.3% Q110 #13 495 2.3% #12 354 2.6% #15 99 1.1% #12 41 2.7% Q111 #11 722 2.4% #8 241 2.9% #11 420 2.4% #30 61 0.6% FY10 #8 2,591 2.6% #4 1,000 3.6% #10 1,297 2.1% #21 294 1.1% Syndicated Loans Q410 #7 805 3.2% #2 291 5.2% #13 411 2.1% #9 103 1.9% Bookrunners Q310 #8 621 2.4% #4 276 3.1% #10 283 2.1% #21 63 0.9% Q210 #11 726 1.8% #9 248 2.1% #14 407 1.9% #35 72 0.5% Q110 #8 438 2.8% #4 185 3.6% #10 197 2.6% #30 57 0.5% Underwritten 507 bonds globally, 9.6% of issues in 20101 #1 for EMEA Corporate IG bonds² #2 for all Sterling bond issuance² # 4 Global HY Debt (non USD)1 Data updated 04/04/11 Volume Share in volume terms ■ #4 EMEA Loan Bookrunner² #7 for all bond issuance in EMEA² Primary dealer in 26 countries #3 arranger of finance for the World Bank2 2010 Best Debt House in the UK & Netherlands (EuroMoney) Market Volume in USD Billions <-3 PY Q1 RAG against 2010 FY Position Between -1 & -3 PY > PY Source: Dealogic Strategy Manager 2010 Deals of the Year - Loans EMEA, - Sovereign Bonds Europe, - ECM Europe, - Bonds Asia (The Banker) 1 Thomson Reuters; 2 Dealogic; * All Debt rankings based on DCM and Loans (excluding self-led, money markets and short term) 3 Based on FY10 datal#10More relevant to our clients with tighter resource allocation Client numbers and resources have decreased Reduction XXRBS Narrower client focus still covers majority of potential fee pools GBM Coverage of Top Fee Payers by Region 159 79% 82% Banking TPA (62%) GBM Clients 95% 61 101 Banking RWA (57%) 43 Impairments as % of Loans & Advances to customers Other -5% Notes: EMEA Include 250 fee payers by region. 21% 18% Americas Asia Fees include all market revenues for DCM, ECM and Corporate Finance 63 Client satisfaction is recovering in all regions Quality of client relationships, % 39 37 31 32 32 25 0.3 20 21 22 (33%) 0.2 2008 2010 32 32 2008 2009 2010 2008 2009 2010 2008 2009 2010 2008 2009 2010 UK EMEA ex UK AMERICAS APAC Source: Greenwich Associates Good Outstanding#11Delivering enhanced shareholder value Reduced revenue volatility Competitive cost / income ratio (#2) GBM daily revenues 31 Dec 2008 30 June 2009 1 Jan 2010 30 June 2010 RBS 31 Dec 2010 79% 74% 69% 67% 66% 62% 62% 63% 60% 54% 56% 25.2 82% 16.6 14.6 15.2 15.3 13.3 10.3 11.2 10.4 8.3 7.8 ■Higher attributable profit margin (#1) 6.6 7.5 6.7 5.7 5.5 4.8 4.5 4.4 3.5 2.8 2.2 2.0 1.4 33% 40% 39% 37% B 36% ய 44% 29% 45% 25% 21% 30% 18% F Bank G XXRBS GBM Core Bank H Bank I Bank J Bank K % Net Profit as % of revenues FY 10 headline revenues excl Fair Value adjustments FY10 Profits post impairments#12Investing in our people and infrastructure People Proposition Technology / infrastructure Market standard reward philosophy Performance based - Deferral policy Staff turnover levels normalised ■ Significant investment in training and development Investing in the future: GBM Graduate. programme in Top 20 in The Times survey 2011 £350m p/a incremental investment to date in sustainable and efficient platform £300m invested in improving system resilience Continued RBS Group investment in Finance and Risk platforms to improve risk management ■Industry-leading offshore capability Continued investment in electronic platforms RBS#13Conclusions RBS ■ Our strategy remains unchanged. We continue to defend our world-class franchises and invest in growth businesses that will diversify our business mix ■Good progress in creating a truly refocused business - but much still to do Delivered strong shareholder value in line with leading industry peers ■We continue to invest to improve our RoE: increase efficiency, reduce costs and deliver new platforms ■Regulation is the most critical issue facing our industry. Precise impact remains uncertain, mitigation planning will continue to evolve over time.