PROFITS soared at Northern Rock's so called bad bank, run by the Government, last year.

Underlying profit before tax at Northern Rock Asset Management (NRAM) rose to £789.9m, compared with £191.3m in 2010.

It enabled the bank to pay back £2bn of its Government loan last year taking the total repaid to £3.1bn since the bank was split from Northern Rock plc in January 2010.

UK Asset Resolution Limited, the body set up to oversee NRAM and Bradford & Bingley assets, from which £150m was repaid, still owes £46.6bn and remains the sixth biggest mortgage provider in the UK.

UKAR Chief Executive Richard Banks said: "We continue to make good progress against our objectives and made further significant repayments of the government loans.

"This improving performance is against a backdrop of challenging economic conditions and increasing hardship for some customers.

"Arrears and possessions are falling at B&B and we have stabilised the position with NRAM where arrears are now reducing due to our proactive approach."

A report this week said Northern Rock and Bradford & Bingley should generate a cash return of between £95bn and £97bn, compared with 64 billion of initial funding.

However, it warned the process could take up to 15 years to complete.

Northern Rock was nationalised and taken into Government ownership in February 2008.

The management and control of Nram was integrated with Bradford and Bingley, which was also nationalised in 2008, in October 2010.