The embattled chairman of Royal Bank of Scotland (RBS) apologised to investors today for presiding over the second-largest loss in British banking history.

Sir Tom McKillop said: “We're all deeply disappointed to be announcing such results and apologise for the pain this has caused our shareholders.” Shares in the bank closed up more than 3 per cent at 240p.

RBS lost £692 million in the first half of the year after writing down £5.9 billion on investments hit by the credit crunch. It is the first time the bank has reported a loss in its 40-year history as a listed company and is beaten in the banking sector only by a £715 million loss by Lloyds Bank in 1989.

Shareholders have called for Sir Tom and Sir Fred Goodwin, the chief executive, to be dismissed over the results, which come on top of a £12 billion rights issue, Britain's biggest cash call.

A chastened Sir Fred said today that he was disappointed and numbed by the blows to the bank, which last year led a consortium to pay €71 billion for ABN Amro. RBS's €10 billion contribution to the deal has been blamed for the bank's capital crisis. “But I'm also galvanised,” he said. “I hope you get a sense of my and my colleagues' determination to get us out of this place.”

Today's loss compares with a profit of £5.1 billion a year ago. Underlying profit, which strips out one-offs such as the writedowns, was £5.1 billion for the six months to June 30, down 3 per cent. RBS warned the market of the size of its writedown when it announced its rights issue in April. The £5.9 billion hit would have been worse if not for an £812 million improvement in the value of bank's own bonds, some of which it owns and which helped to offset the charges.

Sir Fred hinted that the worst of the writedowns was over. “It does feel like we've taken a quantum step forward,” he said. The bank was the first to tap investors for extra cash to bolster its capital ratios. Despite the bold move having been vindicated, Sir Tom said: “We're not smug about anything at the moment, I can assure you.”

The bank, which had been one of Britain's biggest providers of leveraged finance, cut its portfolio of the loans from £14.5 billion at the end of last year to £10.8 billion in the first half and sold a further £1.25 billion of loans last month. These loans were heavily criticised at the height of the credit crunch, after the market to sell them to investors collapsed.

Johnny Cameron, the chairman of RBS's investment bank, said that the securitisation market remained largely closed. “Signs of life? There are a few, but I'd hesitate to call them the green shoots of spring yet,” he said.

RBS's core equity Tier 1 capital ratio was 5.7 per cent at the end of June and should hit 6 per cent by the end of the year. RBS is also undertaking a disposals programme and has sold Angel Trains and its 50 per cent share in the Tesco Personal Finance joint venture. It needs net gains of £4 billion from the programme, also to help with Tier 1 capital, and said today that it had made £1 billion so far.

Sir Fred said that talks to sell the bank's insurance business, which includes the Direct Line and Churchill brands, were continuing with a number of buyers. “The only thing that will stop it being sold is if we can't get the right price in the current market,” he said. The sale had been hoped to raise as much as £7 billion. The bank is aiming for €2.3 billion (£1.8 billion) in synergies from ABN Amro by 2010. Sir Fred said that cost savings were almost twice what he had expected so far and had contributed £135 million to the first-half figures.

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