Further to this, the bank plans to release itself from the Treasury's guarantee arrangements by the end of 2011.
It revealed that it had reduced its outstanding debt to the Bank of England by £2.9 billion since the end of December 2007 to take the total debt back to £24 billion.
Going forward, Northern Rock is to appoint a number of new non-executive directors and continue with the planned overhaul of its workforce. This will see around 2,000 staff made redundant over the next three years - the majority of these cuts timetabled to take place within the first year.
The remaining staff will benefit from an incentive scheme which is to be put in place as part of the bank's governmental obligations.
It is believed that this smaller business model, and the subsequent reduction in operating costs, will allow Northern Rock to reduce its balance sheet to approximately £50 billion by the end of 2011 (from the current level of £107 billion).
The business reported a statutory loss before tax of £167.6 million in 2007, and is expected to make further significant losses during 2008.
Ron Sandler, Northern Rock's executive chairman, said: “The 2007 results reflect the impact of deteriorating market conditions and the liquidity and funding constraints experienced in the second half of the year by the Company.
“Looking ahead, we have developed a business plan that we believe will help drive the bank back towards profitability, and ensure it has a sustainable future and remains an important employer in the North East.
“In doing so, we have worked hard to strike a sensible balance between our requirement not to use Government support to compete unfairly, and our commitment to meet Government’s objectives by creating a business that is sufficiently secure financially for taxpayer support to be progressively withdrawn.
"Without distorting competition, we are determined to create a viable business to be returned to the private sector.”
