State-owned bank Northern Rock, which came close to collapse three years ago, said Wednesday that losses narrowed to 257.5 million pounds last year.

The pre-tax loss was a large improvement after a massive shortfall of 1.36 billion pounds in 2008, the group said in a results statement.

Impairment charges, meanwhile, grew to 1.045 billion pounds in 2009 from 894.4 million the previous year.

Northern Rock also revealed that the troubled bank increased its government loan by 8.5 billion pounds to a total of 22.8 billion pounds, after a major restructuring earlier this year.

And the lender added that Chief Executive Gary Hoffman has waived his 700,000-pound bonus, in line with the bosses of the nation's five biggest banks who have either chosen to waive or donate their bonuses to charity.

However, the loss-making bank said it will pay out bonuses totalling 14.9 million pounds to other staff members, and cited its improved performance.

But Hoffman warned that the economic outlook was unclear, while the recovery was expected to be fragile.

"The outlook for the UK economy remains uncertain," he said in the earnings release.

"After a contraction in the economy during 2009, with increases in unemployment and house price deflation, conditions appear to have stabilised, but economic recovery is still expected to be relatively weak."

Northern Rock was taken into public ownership in early 2008 after it ran into severe funding problems because of the credit crunch.

The troubled group was plunged into crisis in mid-September 2007 when it was forced to seek emergency help from the Bank of England. That sparked the first rush in a British bank in living memory, as customers withdrew cash en masse.

To prevent meltdown, the government agreed in December 2007 to guarantee all customer deposits held at the struggling group.

The government said last month that it will end its blanket guarantee on May 24 for all savings deposits held at the group.

Earlier this year, Northern Rock was broken up into two parts -- a so-called "good bank" that continues its economic activities, and a "bad bank" management company to run down the remaining assets.

The "good" part of the bank is widely expected to be sold to the private sector at some stage, while the "bad" part is likely to remain in public hands.