The taxpayer should not lose a penny on Bradford & Bingley, the former building society which was nationalised last year said today.

The bank's £41 billion of largely buy-to-let mortgages was taken over by the Treasury last September when its branch network and savings business was sold off to Spanish bank Santander for £612 million.

Today in its business plan, which is being submitted for European approval of the state takeover, the bank said: "The expectation is that creditors will ultimately be paid out in full through the realisation of B&B's assets."

B&B has some £30 billion of outstanding bonds and commercial paper and also owes some £14 billion to the Financial Services Compensation Scheme and £4 billion to the Treasury.

B&B also revealed today that bad loans to its 300,000 mortgage borrowers soared to £508 million after it was nationalised. That is a more than 20 times the bad-debt charge of just £22.5 million it saw in 2007.

It admitted that it had taken a "highly conservative view" not just of its own lending but also the likely course of the UK housing market in the near future. In addition, it warned that a "further deterioration in the arrears rate should be expected in 2008 and 2010."

Chairman Richard Pym said that in 2009 his team "will be working hard to protect the value of our assets and to minimise the risk to shareholders."

But B&B pointed out that it could well be a long time before all its creditors have been paid back. The virtual closure of the buy-to-let mortgage market has seen redemptions slide from 18% in 2007 to just around 5% in the last quarter of last year.

At the same time borrowers who are three months or more behind on mortgage payments jumped from 1.63% in 2007 to 4.6% last year.