RBS suffers first-ever loss after $11 bln writedown

By Steve Slater and Clara Ferreira-Marques

LONDON (Reuters) - A 5.9 billion pound ($11.4 billion) writedown on risky assets sent Royal Bank of Scotland (RBS.L: Quote) to a first-half loss of 691 million pounds -- better than feared, but still one of the biggest losses in British history.

RBS, Britain's second-biggest bank, said on Friday the loss was "a chastening experience" but it was building a comfortable capital cushion and sales of assets were going as planned, although tough financial and economic conditions would continue.

Fred Goodwin, RBS chief executive, said the bank was talking to "a number" of potential buyers for its insurance arm, which is valued at 5 to 6 billion pounds, but he was not reliant on a sale to reach higher capital targets.

By 5 a.m. EDT RBS shares were up 2 percent at 238 pence, one of the top performing UK stocks, as analysts said its capital ratio came in higher than expected and underlying earnings were resilient in the face of faltering economies.

"It may have drawn a line under the big credit losses, the capital raising is done and there are synergies to come through from ABN ... but the underlying business is reflecting a tough market, particularly in the United States," said Mike Trippitt, analyst at Oriel Securities.

RBS swung to its first-ever reported loss from a 5.1 billion pound profit a year ago after being hit by the writedowns on credit products. This was in line with previous guidance but partially offset by an 812 million pound reduction in the value of debt it carries.

It had been expected to report a 1.2 billion pound loss, based on the average of five analysts' forecasts.

Goodwin said difficult conditions in financial markets were likely to be compounded by a deteriorating economic outlook.