But chairman Ron Sand­ler said the nationalised bank was on course to repay the Bank of Eng­land’s £27billion loan by the end of 2010, with plans on track to cut the mortgage book and grow deposits.

However, Sandler said the mortgage market presented the Rock with “challenges”, “especially as regards the company’s ability to meet its mortgage redemption targets”.

This was because the bank will be left with mortgage customers no one else will lend to.

“We were aware this might happen, and have planned for it,” he said.

People behind in their payments by three months or more rose from 0.57 per cent of the mortgage book at the end of December to 0.95 per cent for the quarter. Sandler said the credit quality was “satisfactory”.

The Bank of England loan now stands at £24billion.

Sandler said the Rock had generated about £1.2bil­lion in new mortgage lending, around a quarter of the sum for the same period last year.

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