BRADFORD & Bingley has said that its pre-tax £196m losses last year were much lower than the targets agreed with Government.
The former building society's was nationalized in September 2008, after which Santander bought B&B's £20bn savings business for £612m.
That left the taxpayer owning a £42bn mortgage book.
Managing director Richard Banks said: “We have made substantial progress against our business objectives in 2009 and met all of the financial goals in our business plan.
"The loss before tax of £196m for the year was £71m better than our original plan.”
B&B said the total number of mortgages three months or more in arrears or in possession was equivalent to 5.54 per cent of mortgage accounts, up from 4.6 per cent last year.
But the bank added: “During the second half of the year arrears levels – particularly early arrears - fell as a result of lower interest rates and improved credit collection processes and this downward trend has continued in the early part of 2010.”