The Treasury insisted last night that Northern Rock still had a 'good mortgage book', as the nationalised bank prepared to publish accounts showing arrears were rising and it made a loss in 2007. Financial Times

Ron Sandler, executive chairman, will present the accounts and map out a radically different business plan as he attempts to pay back a £24bn government loan.

The bank is expected to report a loss for last year, in place of the £540m pre-tax profits anticipated before the credit squeeze took hold. The loss reflects the interest payments to the Bank of England for the emergency loan, as well as write downs and fees to advisers for the five months during which the bank tried to find a bidder before it was nationalised.

Documents filed with the Securities and Exchange Commission in the US last week showed there had been a deterioration in mortgage asset quality in the past few months in Granite, Northern Rock’s securitisation vehicle.