A £4.9 billion portfolio of loans bought by the taxpayer during the financial crisis has been sold in a “milestone” move, the Chancellor has announced.

The portfolio of mortgages and unsecured loans from NRAM – formerly part of failed bank Northern Rock – were sold to US investment banking giant Citi, with finance provided by bond manager Pimco.

The Treasury said the sale marks a “major milestone” in the recovery of taxpayers’ cash, with the proceeds used to fully repay the loans provided to NRAM and Bradford & Bingley (B&B) at the height of the financial crisis, while also paying down government borrowing.

After the deal, UK Asset Resolution (UKAR) – the so-called bad bank that manages the assets of Northern Rock and B&B – owns around £8 billion worth of assets, down from about £14 billion in September 2018 and £116 billion in 2010.

Chancellor Philip Hammond said: “Through our careful oversight of the country’s finances we are continuing to recover significant amounts of money that were loaned during the financial crash.

“Today’s sale enables us to recover the full amount taxpayers loaned to Northern Rock and Bradford & Bingley, helping us pay down our debts and strengthen our finances for the future.”

The Treasury added that the sale brings it a step closer to the final disposal of NRAM and B&B, as announced in last year’s Autumn Budget.

Mr Hammond has set a target to slash UKAR’s balance sheet to zero by this time next year.

B&B and Northern Rock had to be rescued by taxpayers after their failure in the crisis.

Last autumn marked the 10th anniversary of the collapse of Lehman Brothers, which saw the global financial crisis spin out of control.