THE company running the so-called "bad" part of collapsed lenders Northern Rock and Bradford & Bingley has repaid another £3.7 billion to the Treasury and said plans to sell further assets to shrink its balance sheet were its most ambitious to date.

UK Asset Resolution (UKAR) - the state-owned firm responsible for winding down the so called mortgage books of the failed banks - said it had now repaid almost a third of government loans since it was formed in 2010 following the financial crisis, totalling £14.1 billion. It has been set the target of repaying all debts by 2021.

UKAR employs about 976 staff at its offices on Doxford Park, Sunderland, and 1,102 at its site in West Yorkshire. It was formed in October 2010 to manage the loan books of Bradford & Bingley and Northern Rock after the lenders failed during the financial crisis. A year later the Government split Northern Rock in two, forming Northern Rock plc, which was sold to Virgin Money, and Northern Rock Asset Management (NRAM) to house what were regarded as the more toxic loans.

Including other payments, such as interest and taxes, UKAR said total payments to the taxpayer reached £4.4 billion in the year to March 31.

The group's balance sheet also reduced by £8.8 billion in the year, down 43 per cent in total since 2010, helped by another £5.3 billion of mortgage redemptions as rising house prices and low interest rates have encouraged borrowers to look elsewhere for deals.

UKAR said plans to sell about £13 billion of mortgage assets and to either sell or outsource the day-to-day mortgage servicing activities would be "transformational" for the business.

It said the initiatives would "determine the next stage in our future", with the mortgage asset sale five times greater than the £2.7 billion deal struck with a consortium led by US bank JP Morgan in 2014.

Announcing annual results, UKAR chief executive Richard Banks said: "Over the past four and a half years we have achieved excellent results, reducing the balance sheet by nearly £50 billion and overseeing a 70 per cent fall in the number of mortgage accounts three or more months in arrears."

Underlying pre-tax profits rose 11 per cent to £1.4 billion in the year to March 31 and UKAR said the number of mortgages three or more months in arrears fell by 23 per cent to 11,976.

Ultra-low interest rates have also helped customers keep up with repayments, with arrears owed by borrowers down by a quarter to £90.6 million.

The group now has almost 389,000 customers, down from 467,000 a year earlier, with 455,000 mortgage accounts and 106,000 unsecured personal loan accounts.

UKAR revealed it had set aside another £33 million for compensation for mis-selling of payment protection insurance (PPI) for the next three years, but said the flow of complaints had reduced considerably.