Nationalised bank Northern Rock wrote off more than £1bn during 2009 as the number of people defaulting on their debts soared, figures showed yesterday.

Losses on bad debts reached £1.04bn during the year, a 17% rise on the amount for 2008.

However, it said it was paying staff £14.9m in bonuses after losses narrowed last year. The bonus payments for Northern Rock staff include a £1.5m pay-out under the Chancellor's one-off windfall tax, as 32 employees received rewards of £25,000 or more.

The bank reported a pre-tax shortfall of £257.5m for the 12 months to December 31, compared with a £1.36bn loss in 2008.

Northern Rock, which completed its restructure into ‘good’ and ‘bad’ banks at the turn of the year, said the bonus payment came after staff met agreed objectives over the year.

Chief executive Gary Hoffman waived his entitlement to a bonus under the scheme and the bank said it was designing a reward scheme for him that would take into account the performances of both of the newly created banks.

The group blamed the high level of bad debt on rising unemployment and falling house prices, as well as increasing numbers of customers falling behind with their repayments. It said impairment charges had started to fall during the second half of the year as the economy improved and house prices rose, but it warned that levels of bad debt looked set to remain “above historic norms” for the foreseeable future.

Northern Rock claimed it had helped 1,700 families who were in repayment difficulties stay in their homes by switching them to interest-only deals or increasing the length of their mortgage term.

The group, which was criticised in 2008 for repossessing around 50% more homes than the industry average, said it had also doubled the number of staff in its debt management division to increase dialogue with people who were having difficulties.

It declined to say how many homes were repossessed during the year, but did provide figures showing that the number of unsold repossessed properties on its books had halved from its 2008 peak to 2,061 at the end of last year, down from 3,620 some 12 months earlier.

The difficult economic conditions led to a sharp rise in the proportion of mortgages that were in arrears of at least three months, up to 4.28% in December, from 2.92% 12 months earlier.

The industry average was 2.38% according to the Council of Mortgage Lenders.