RBS suffers first-ever loss

By Steve Slater and Clara Ferreira-Marques

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

RBS, the second-biggest bank, said on Friday the loss was "a chastening experience" but it was building a comfortable capital cushion, reducing risk and pushing ahead with sales of assets including its insurance business as planned.

"I'm disappointed and numbed by it, but I'm also galvanised," said Chief Executive Fred Goodwin, saying his task was not to let writedowns overshadow some strong performances during tough conditions.

By 3:30 p.m. RBS shares were up 3.4 percent at 241 pence, one of the top performing 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 and was 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.

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