By Ian Walker

LONDON--Royal Bank of Scotland Group PLC (RBS.LN) said Tuesday it expects to exit those parts of the business that no longer fit within its plans by the end of 2016, and will return any surplus capital to shareholders.

The 80% U.K. government-owned bank has previously set out a plan to become a substantially U.K.- and Ireland-focused retail and commercial bank with a core wholesale banking offer.

It has decided between the parts of the bank it wants to keep--the go-forward bank--and the parts that no longer fit plans, the exit bank.

"Between now and 2019, the exit bank will occupy a diminishing amount of our time, allowing us to increasingly focus on becoming a substantially U.K. and Ireland focused retail and commercial bank with a core wholesale banking offer," Chief Executive Ross McEwan told shareholders at the annual general meeting.

"RBS is in a much, much better shape than it was just a year ago. We are now in a position where we can accelerate our strategy while taking clear actions to address areas where returns are not sustainable. As a result, the wind down of our exit bank will be substantially achieved by the end of 2016," he added.

-Write to Ian Walker at ian.walker@wsj.com; @IanWalk40289749

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