MOVES are under way by UKAR, the Crossflatts-based bank behind failed lenders Bradford & Bingley and Northern Rock, to either sell or outsource day-to-day mortgage servicing activities.

The state-owned company is also in negotiations over selling another £13 billion of Northern Rock mortgage assets.

Chief executive Richard Banks said that if the deals go through — a shortlist of bidders will be drawn up by the end of next month — they would be transformational to the business.

Selling the mortgage assets would significantly speed up UKAR’s repayment of former Northern Rock assets to the Treasury.

Mr Banks said it is unlikely the deals will complete before the end of the year. A successful sale of the mortgage servicing operations could see "another name above the door" at Crossflatts.

Mr Banks 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.

UKAR said it had repaid another £3.7 billion to the Government and said plans to sell further assets to shrink its balance sheet were its “most ambitious” to date. Mr Banks said the rate of repaying the Treasury was "on plan", with almost a third of government loans repaid since it was formed in 2010 following the financial crisis.

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 encouraged borrowers to look elsewhere for deals.

Mr 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 down by a quarter to £90.6 million. The group now has 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 for the next three years, but said the flow of complaints had “reduced considerably”.