UPDATE 3-Britain's UKFI says bank disposals to take years

* Report says no fixed timetable for share sales

* Chairman sees first sales within a year

* Expects a number of deals over several years

* Says unrealised loss for taxpayers is 10.9 bln stg

(Adds UKFI chairman comment, updates shares)

By Myles Neligan and Douwe Miedema

LONDON, July 13 (Reuters) - Britain will need several years to sell stakes in two of its biggest banks, the body managing the holdings said, refusing to set a precise timescale on an exit that could cost taxpayers billions of pounds.

The government will offload the shares in Royal Bank of Scotland (RBS.L) and Lloyds Banking Group (LLOY.L) through a protracted series of sales into markets, UK Financial Investments (UKFI) said in its first annual report.

"UKFI does not set any fixed timetable for disposing of the shares, but says it expects to undertake a number of capital markets transactions over a sustained period," the body said in an accompanying statement on Monday.