Sir Fred Goodwin, Royal Bank of Scotland kingpin warned today that the turmoil in the credit markets is likely to continue for at least another year, and said the Bank’s “risk appetite is tempered”.

Discussing an “adjustment” in financial markets, Sir Fred said: “It is difficult to see it would take less than 12 months to work its way through.”

He added that “there’s clearly more bad news than good news, there’s almost exclusively bad news, but I don’t think we’re looking at the end of the world.” He saw “chinks of light” in some areas of capital markets and repeatedly reiterated that the bank “remains very much open for business”.

Sir Fred’s comments came as RBS, which raised £12bn from the biggest ever rights issue earlier this week, reassured investors in a trading update that its performance and writedowns on risky assets remain in line with previous guidance. RBS said in April that it expects a hit of £5.9bn before tax from its credit market exposures this year.

Banking shares rose on the news and were the top performers on the FTSE 100 in early trading as traders were relieved that there had not been a further deterioration in the RBS loan book. The bank’s shares climbed 4.75p to 238.5p but were down later, by 3p to 230.25p. HBOS was up 4.5p to 296.5p and Lloyds TSB rose 3.75p to 355.25p.

“The coming months I look to with caution but with a degree of optimism. It’s ’steady as she goes’ at this point. The business continues to perform satisfactorily on an underlying basis. There is business to be done and we’re doing it,” Sir Fred said, while acknowledging that the credit crunch is holding back the performance of many of RBS’s businesses.

ABN Amro, the Dutch bank acquired by RBS last year, is performing better than expected in terms of revenues and costs, it said.

Sir Fred said the bank is confident of selling its insurance arm for the price it had in mind at the start of the auction despite continued market turbulence. The operations, which include Direct Line and Churchill, were put up for sale in April with an expected price tag of up to £7bn.

“There are a number of people who would all ostensibly be good owners and capable of paying the price that we’re looking for,” he said. “We had a price in our minds that we were looking for at the start of the process and that hasn’t changed. We’re determined not to sell this for an undervalue, but at this point that doesn’t look like an option that’s going to come to pass.”

Sir Fred refused to give a forecast for UK house prices falls in the coming months but said it would “not be nearly as bad as in the US”.

Commenting on the £12bn rights issue, Sir Fred said “It was a good opportunity to be interacting with our shareholders but it won’t go down as an enjoyable experience,” referring to the “gyrations” which he said weren’t surprising given the size of the cash call and the “very exceptional market circumstances”.