RBS investors agree government bailout

Royal Bank of Scotland's chairman has admitted that RBS's racy balance sheet and acquisition of ABN Amro left it unprepared for the financial crisis as he and his chief executive finally apologised for the once-mighty lender's £20bn Government bailout.

Sir Tom McKillop made the comments to shareholders as RBS sought their approval for an emergency capital injection that is likely to leave the Government as the bank's majority shareholder. The motion to increase the company's share capital was passed by 99.3 per cent of votes cast.

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During the credit boom, RBS, which owns NatWest and Direct Line, maximised shareholder returns by maintaining a thin capital buffer against future losses as its loan book ballooned. It also went on an acquisition spree that ended in the £10bn buy-up of the Dutch bank ABN Amro's wholesale banking business, which caused about £2bn of first-half losses.

"The group's historic use of an efficient balance sheet meant we entered the period of significant market dislocation with a capital base that was, with hindsight, low relative to the size of our balance sheet," Sir Tom told a shareholder meeting in Edinburgh. "The [ABN Amro] acquisition increased our exposure to those wholesale markets within which many of the problems have emerged during the course of this financial crisis."

Sir Tom apologised to investors for the "very real financial and ... human cost" of losses on their investments and to customers for anxiety caused by the bank's woes. Employees had also lost out because they had invested earnings in RBS shares, he said. "I, as chairman of RBS Group, both personally and in the office I hold, am profoundly sorry about the position we have reached."

His apology was echoed by Sir Fred Goodwin, the chief executive, who told a shareholder he was "extremely, extremely sorry" for RBS's plight. Both men had stopped short of apologising before yesterday. Sir Fred will be replaced on Monday, after nearly nine years in charge, by Stephen Hester, the former boss of British Land. Sir Tom will leave at the next annual meeting.

RBS shares rose 8.8 per cent to 46p, far adrift of the 65.5p offer price for the £15bn of new ordinary shares.