RBS bosses survive as it chalks up £691m loss

Analysts had been forecasting losses of anything up to £1.7 billion and some still say that the credit crunch provisions are not yet high enough.

Last year the bank made profits of £5 billion in the first half. Today's £5.9 billion hit is exactly the same amount RBS had estimated in April when it launched its balance sheet-bolstering rights issue.

McKillop and Goodwin had come under growing pressure from leading investors after their role in the ¤71 billion (£56 billion) takeover of Dutch bank ABN Amro last year just before the credit crunch struck and the subsequent £12 billion rights issue earlier.

The rights issue new shares were sold at 200p each and today RBS shares rose 6p to 239p.

Echoing his rival John Varley at Barclays yesterday Goodwin effectively apologised to shareholders: "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 the shares."

RBS shares have more than halved in value in the past 12 months. Goodwin admitted that the credit crunch losses were "unsatisfactory" and said: "We are determined to ensure that the inherent strengths of the group's diverse business model are not obscured in this way again."

He said the bank had been actively reducing its credit market portfolio "disposing of a number of holdings at prices that have often been higher than we had estimated in April". It had also cut its leveraged finance portfolio from £14.5 billion at the end of 2007 to £10.8 billion at the end of June with a further £1.25 billion sold since then. Again the prices achieved were better than had been assumed in April.

On the other side of the coin it has had to increase the scale of provisions it has made against its exposure to monoline insurers, the guarantors of many municipal bonds in the United States.

As promised at the rights issue investors will get the interim dividend in shares rather than cash but Goodwin said it was the intention to make the full-year payout in cash.

Goodwin said the planned sale of RBS Insurance, which includes Churchill and Direct Line, was still going on but "nothing has been agreed."