We reported recently on how the nationalised lender Northern Rock is planning to split the company into two bodies: a good bank containing the savings accounts and well managed home owner loans and mortgages and a bad bank which will take care of all the “toxic” debts such as home owner loans and personal loans with high arrears levels and defaults.

Now the Bradford and Bingley building society has announced that it intends to carry out a similar exercise in order to group together some of its better assets to attract potential buyers and help the lender to repay its government loan.

Bradford and Bingley was partly nationalised one year ago and received a loan from the government of £18.4 billion via the Financial Services Compensation Scheme (FSCS), to bail the company out of its financial difficulties, which were largely created by a high level of defaults and arrears on its buy to let loan book, along with other various badly managed loans and other debts.

Although the original Financial Services Compensation Scheme loan fee was paid by the government, the financial services industry is being forced to foot the eventual bill for the bail out and Bradford and Bingley are under pressure to repay the £18.4 billion loan as quickly as possible.

When Bradford and Bingley was originally bailed out with the loan, the Spanish bank Santander quickly bought up the savings book of the building society, worth around £20 billion which helped to reduce the amount of the original loan required. The assets of Bradford and Bingley are worth somewhere in the region of £50 billion and the lender is now attempting to package together the more attractive elements of its business, which other financial companies may be interested in buying and going some way to repaying its loan.