Adam Applegarth, who stepped down as chief executive of the mortgage lender in December, could receive £63,333 a month for up to a year under the severance deal, the nationalised lender's 2007 annual report said.

The document also revealed that Northern Rock made a loss of £167.6m during the year as it tried to fight off nationalisation, compared to a £626.7 million profit the year before.

Northern Rock, which is now under the chairmanship of City troubleshooter Ron Sandler, also said it pledged to repay £24 billion in Government loans by the end of 2010.

The annual report discloses that Mr Applegarth was entitled to a "termination payment" of £760,000 when he left on December 12 last year. This is payable monthly until November 16 this year, but will be reduced if the former boss gets another job paying more than £20,000 in salary before that time.

The annual report said Mr Applegarth's settlement terms were "substantially less" than the amount he was otherwise due when he left last year.

Northern Rock also agreed to contribute £5,000 plus VAT towards Mr Applegarth's legal fees, it was disclosed. And £75,000 of his mortgage will continue to be charged at the concessionary staff interest rate until November.

Northern Rock said there had been a £12.2 billion outflow of retail deposits in the year, compared with inflows of £2.5 billion in 2006. This followed the run on the bank as customers queued to withdraw savings in the aftermath of Northern asking the Bank of England for emergency assistance.

Northern Rock blamed its 2007 loss on exceptional costs related to the company's strategic review after the money markets froze last summer and ruined its business model, as well as writedowns on investments linked to the credit crunch. But the bank said it made an underlying pre-tax profit of £421.9 million after stripping out the effects of the non-recurring costs. This compares to £587.2 million a year earlier.

The bank warned on Monday that it would be "significantly" loss-making this year due to further restructuring costs, higher funding bills and the deteriorating credit environment.