Northern Rock has reported reduced losses of £68.5 million for the first six months of 2011.

In comparison, in the six months to 30 June 2010 its losses ran to £142.6 million.

The underlying loss, excluding hedge accounting volatility, was £78.8 million, compared to £140 million over the same period last year.

Gross lending (including retention business) was £1.5 billion in the six months to 30 June 2011 (six months to 30 June 2010 – £2.0 billion), while net lending was £0.3 billion in the same period (six months to 30 June 2010 – £0.9 billion).

There has been a reduction in completions in the first half compared with the same period in 2010.

Mortgage accounts more than three months in arrears at 30 June 2011 representing 0.26% of the book.

The average loan to value (LTV) for new lending completed in the first half was 69% (six months to 30 June 2010 – 60%) and the average indexed LTV of the book was 61% at 30 June 2011 (31 December 2010 – 59%).

The nationalised bank expects to begin trading profitably during the second half of 2012 and is preparing for a return to private ownership.

Ron Sandler, executive chairman, said: “Northern Rock has made good progress in the first half of 2011. The company continued to be loss-making