* State-owned bank has maiden 232 mln stg underlying loss
* Says loss in line with expectations after restructuring
* Bank says preparing for return to the private sector
(Adds details)
By Steve Slater
LONDON, March 9 (Reuters) - Northern Rock Plc unveiled its first-ever annual results after arising from the ashes of the failed UK lender, posting a hefty loss as it prepares to gradually cut ties with the government.
The state-owned bank posted a 232 million pound ($374.5 million) loss, weighed down by restructuring costs, holding high levels of liquidity, and costs incurred from government guarantees, which have now been removed.
Executive Chairman Ron Sandler said he was confident the bank "is on the right trajectory to profitability", and that a 92.4 million pounds in the second half marked an improvement from a 140 million loss in the first six months.
Investment bank Morgan Stanley has been appointed as an adviser to return the bank into private hands, sources familiar with the situation have said, as the UK government is keen to pull out and raise cash to stop a budget hole.
Options for the bank include a sale, a stock market flotation or giving it in the hands of its clients through a remutualisation, the sources said.
The bank said it would return to the private sector "when conditions are right to do so".
The bank was nationalised three years ago after being hit by the first run on a British bank for over a century and was split into a "good bank" and a "bad bank", comprising existing mortgages and unsecured loans.
Whereas the Northern Rock Plc -- the "good bank" -- is loss-making, "bad bank" Northern Rock Asset Management (NRAM), made a profit in the first half of last year after underperforming loans improved.
Northern Rock Plc saw retail deposits continuing to decline. Savers pulled out almost 1 billion pounds in the second half of the year and had 16.7 billion pounds of retail deposits at the end of the year.
Clients already withdrew 2 billion pounds in the first half, when a government deposit guarantee ended. ($1=.6194 Pound) (Reporting by Steve Slater; Editing by Douwe Miedema and Louise Heavens)