A BANK set up to manage the failed assets of Bradford & Bingley after the financial crisis has said it is aiming to complete the wind down of the lender within three years.

UK Asset Resolution (UKAR) - formed in 2010 - said it was "probable" it could complete the sell-down of Bradford & Bingley and Northern Rock by 2021, in what would mark another milestone in the sector's recovery since the credit crunch meltdown 10 years ago.

It has been working with advisers on how to offload its remaining assets, which has so far been shrunk by 83 per cent or £96 billion.

UKAR said it had cut the balance sheet by another £14.5 billion to £17.2 billion in the year to March 31.

But with another £5 billion sell-off announced in April and the sale of another £900 million of equity release mortgages, which is expected to complete later this year, its customer balances is expected to fall below £11 billion.

A spokesman for UKAR, the so-called bad bank, said: "As always, we will need to satisfy ourselves, UK Government Investments and HM Treasury that whatever option we choose represents value for money for the taxpayer but, subject to the continuation of supportive market conditions, we believe that it is probable that the process can be completed by 2021."

The two defunct banks were nationalised after their collapse in 2008.

In April, an investor group led by Barclays has agreed to buy two mortgage books from defunct bank Bradford & Bingley for £5.3 billion.

The latest announcement comes after the Government restarted the process of selling down its stake in Royal Bank of Scotland less than a month ago, while Lloyds Banking Group was fully returned to private hands last year.

Ian Hares, chief executive of UKAR, said: "I am pleased that we have continued to make good progress in achieving our objective, with high levels of service delivered for our customers and an 83% reduction in our balance sheet since formation in 2010."

UKAR reported a 17% fall in annual underlying pre-tax profits to £583.9 million as a result of efforts to reduce its mortgage balance sheet.

It borrowed £48.7 billion of taxpayer cash to take on the loans of Northern Rock and Bradford & Bingley, but has so far paid £38.4 billion back to the Government, representing 79%.

It said £14.7 billion of this was paid back in the last financial year.