Sandler to shrink the Rock by half

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Revealing that the near-collapsed bank made losses of £168 million last year after it was forced to write down investments by another £422 million, Sandler set out detailed plans to return it to break-even within three years.

Sandler said that he would reduce the bank's assets - effectively its mortgage book - from its current £107 million to around £50 million by 2011.

Somewhere between £25 billion and £30 billion of mortgages are up for renewal or automatically shift to higher interest rates this year. Northern Rock has already started pushing customers away to rival banks and building societies.

Other measures outlined by Sandler today include:

Accelerate mortgage redemptions renewing only around four out of every ten which come up
End unsecured lending and commercial lending
Cut costs by 20% and get rid of at least 2,000 staff
Repay the Bank of England loans, which have already come down from £27 billion to a round £24 billion, by 2010.

Sandler admitted the bank would remain "significantly loss-making" this year.

Further details emerged of how much and how quickly Northern Rock's funds disappeared last summer when the credit market dried up.

Although the television pictures all showed the first run on a High Street bank for more than 140 years, with savers queuing round the blocks, in fact more than twice as much was withdrawn from Northern Rock's very popular postal accounts than was taken back over the counter.

In total savers rushed to pull £12.2 billion of their cash out of the bank.

At the same time the drying-up of the money markets saw commercial lenders withdraw almost as much, with a net total of £11.7 billion of wholesale funds being withdrawn over 2007.