Nationalised Northern Rock has said it expects a "significant improvement" in second-half trading thanks to a slow down in mortgage arrears growth.
The Newcastle-based lender will still be loss-making this year, but said the recent trend - helped by record low interest rates and improved debt management - had been "encouraging".
The company said it had helped more than 1,000 struggling borrowers to stay in their homes so far.
The proportion of its loans more than three months behind edged up from 3.92% to 4.11% at the end of September.
Last week European officials approved the split of the business into a "good" and "bad" bank - with the healthy parts of the Rock to be sold back to the private sector.
