Royal Bank of Scotland boss Sir Fred Goodwin has insisted that he remained the best man for the job despite unveiling the group's first loss in 40 years as a public company.

The NatWest and Direct Line owner reported pre-tax losses of £691 million for the first half of this year thanks mainly to a £5.9 billion credit crunch hit.

It is the second biggest banking loss in UK corporate history, and compares with £5 billion of profits the bank made this time last year.

Sir Fred, who asked shareholders for £12 billion in April to shore up the group's balance sheet, said the loss was a "chastening experience" that the board "regret very much".

But he insisted the management team, which includes chairman Sir Tom McKillop, was best placed to bring the bank through the "very difficult market conditions".

"We are focused here very much on doing what's right for our shareholders and to steer the business through a difficult time," Sir Fred said. "We have steered it through good times and we are going to steer it through these times."

Banking analyst Ralph Silva said Sir Tom could be forced out as a result of the loss.

Mr Silva, from the Tower Group, told the BBC Radio 4 Today programme: "I do feel there will be some victims. Maybe the chairman, Sir Tom McKillop, probably will be the one that will have to fall on his sword, and simply because the CEO, Sir Fred Goodwin... removing him would be too disruptive to the organisation at this time and it's just not responsible to do so.

"So if the investors want someone's head they will probably go after the chairman's."

Sir Fred said he was "comfortable" with the level of credit writedowns announced - around two-thirds of which apply to RBS and the remainder to Dutch Bank ABN Amro, which was bought by an RBS-led consortium last year for nearly £50 billion.

But he refused to be drawn on whether they would see the group through to the end of 2008.

On an statutory basis, RBS racked up pre-tax losses of £692 million.

But the bank focuses on the pro-forma measure of £691 million, which assumes ABN Amro was bought at the beginning of last year and is more useful to compare how the enlarged business had progressed.

On an underlying basis - discounting the effect of the huge credit market writedowns - RBS said it made profits of £5.14 billion compared with £5.32 billion the year before.

Sir Fred blamed the overall loss on the writedowns, which were signalled when the £12 billion rights issue was launched.  He said: "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."

The group said its capital ratios - which measure how strong the balance sheet is - were ahead of target thanks to the fundraising exercise.

The core Tier 1 ratio was 5.7%, compared with a 5% target, and he said he hoped to see it rise to 6% by the year end.

In a sign of the more difficult economic times, the group increased its bad debt charge by 58% to £1.48 billion, representing 0.46% 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.

RBS is also pursuing a sale of its insurance business, which includes Direct Line and Churchill.

Sir Fred said: "We are in discussions with people who are able to pay a sensible price." 

He added: "(The deal) is only going to happen when we get an appropriate consideration for the business."

RBS is the last of the UK's major banks to report half-year results this year.  It has been by far the worst affected in terms of credit crunch writedowns.

Richard Hunter, head of UK equities at broker Hargreaves Lansdown, said: "In drawing the interim reporting season to a close, RBS is the first of the largest UK banks to go into the red.

"Another set of contrite comments from a UK bank chief executive does little to mitigate the fact that the business remains under pressure.
"With bad debts jumping nearly 60% and a continuously worsening economic environment, the nearer term prospects seem little better."

He added: "The clock is still ticking for the management team who need to repair some of the damage which has hit RBS financially and reputationally.

"Some solace could be taken from the fact that these writedowns may provide another contribution towards the end of the credit fallout, but there remains much work to be done."

Broker Citi said RBS's results were ahead of market estimates.  Analyst Tom Rayner said they reflected a "strong operating performance but slightly higher loan impairments".

He added: "The bank's ability to continue growing revenues at the current pace could be adversely affected by a significant slowdown in UK corporate loan growth."