Nationalised mortgage lender Northern Rock has hired a Barclays director as its new chief executive on a package that will net him at least £1.1m in his first year.

The bank said that Gary Hoffman, currently group vice chairman and executive director of Barclays, will join the company on October 1.

Northern Rock had been searching for a chief executive since it came under state control in February after funding problems led to it suffering Britain's first bank run in more than a century.

The move will see executive chairman Ron Sandler, former chief of Lloyds of London, become non-executive chairman. His current £1,080,000-a-year salary will now undergo review.

Current chief executive Andy Kuipers, the final member of Northern Rock's original board to still serve with the bank, is to leave the company on August 31.

He took on the job in December, two months before the bank was taken under state control and after former chief Adam Applegarth resigned.

Hoffman has been with Barclays since 1982 and he served as chief executive of Barclaycard, chairman of UK Banking and chairman of Barclaycard. He has been an executive director of Barclays for the last four years and became group vice chairman in 2006.

He will receive a salary of £700,000 and will participate in the incentive scheme the bank is introducing later this year. To compensate him for missing out on bonuses from Barclays he will also receive a £400,000 payment when he joins the company and the same amount on each of the first and second anniversaries of his employment.

He will oversee Northern Rock's turnaround plan that will see it cut around 2000 jobs by 2011 and reduce its residential mortgage lending by half.

"This is a major step forward for Northern Rock and I am delighted that Gary will join the board as CEO,"

Sandler said in a statement. "His skills, experience and overall track record make him an outstanding candidate for the role."

Sandler last month announced that the lender had begun an investigation into whether legal action can be taken against the bank's former board.

Applegarth, former chairman Matt Ridley, and another seven directors quit the bank in the wake of the crisis sparked when the credit crunch cut off vital funding and threw its aggressive expansion strategy into disarray.

Sandler said: "Andy became CEO in extremely difficult circumstances and he has performed the role admirably during his time in office."

Hoffman is also a member of the Visa Europe and Trinity Mirror boards and is a trustee of the Charities Aid Foundation.