Royal Bank of Scotland has reported losses of £692 million for the first half of 2008.

The City had been braced for figures of over £1 billion as RBS unveiled its first loss in 40 years as a public company after suffering writedowns of £5.9 billion.

The group reported statutory pre-tax losses of £692 million for the six months to June 30 - which compares with profits of £5 billion the previous year. Underlying profit fell 3 per cent to £5.1 billion.

The writedowns for Britain's second-biggest bank - which last year led a consortium that bought Dutch bank ABN-Amro for nearly £50 billion - were in line with previous guidance but partially offset by an £812 million reduction in the debt it carried.

The bank said it has increased its bad debt charge by 58 per cent to £1.48 billion, representing 0.46 per cent of loans and advances.

Management was seeing "some increased strains" particularly among small business clients, it added, but has been offset by reductions in losses among personal unsecured debts thanks to a "conservative approach" to this sector in recent years.

Chief executive Sir Fred Goodwin said the loss was a "chastening experience" that "I and my colleagues regret very much".

He continued: "This loss is a consequence of previously signalled writedowns on credit market exposures amounting to £5.9 billion. In response to these new market conditions we moved decisively to strengthen our capital position materially."

He added: "In so doing we are acutely aware that we drew heavily on our shareholders for financial support and we recognise that we must now deliver a level of performance that meets their expectations for the company and restores value to our shares. We are determined to do so, and this is our focus."

RBS, which owns NatWest, recently raised £12 billion from a rights issue and is aiming to raise £950 million through the sale of its stake in Tesco Personal Finance to the supermarket giant to shore up its battered balance sheet.

But attempts to secure another £7 billion from the sale of its Churchill and Direct Line insurance business look likely to be frustrated.

Final offers are due by the end of this month, but reports said US insurer Allstate is the only remaining serious bidder for the assets. Most analysts think £5 billion is the most that RBS can hope for.

RBS has also sold Angel Trains, its train leasing subsidiary, for an estimated profit of up to £300 million.

It is also in talks about selling the Australian and New Zealand operations acquired as part of last year's joint bid for ABN Amro.

Commonwealth Bank of Australia is seen as the favourite to land the investment and wholesale banking business, which could be worth up to £400 million.

National Australia Bank, which owns the Clydesdale and Yorkshire banks in the UK, pulled out of the running last week.

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