Clydesdale and Yorkshire banks swung back to the black as swingeing costs cuts and falling bad debts boosted annual profits.
The lender, owned by National Australia Bank (NAB), said it has largely completed its restructuring a year early, including axing 1,400 jobs.
That helped it report pre-tax cash earnings of £127 million for the year to the end of September, reversing losses of £183 million a year earlier.
But past mistakes continue to haunt the lender, as it added another £130 million charge to compensate customers mis-sold payment protection insurance (PPI). It has now set aside a total £386 million for PPI, and has paid out £234 million of this in compensation.
It also booked £36 million during the year for interest rate swaps mis-sold to small businesses, plus £13 million for credit card insurance sold through disgraced financial services firm CPP Group.
The lender was also slapped with an £8.9 million fine by the City regulator last month after it forced 22,000 customers into higher mortgage repayments to rectify a previous error by bank staff. Including customer compensation, it will cost the bank about £42 million.
Chief executive David Thorburn said: "The positive impact of our strategy is clear to see in the underlying business performance.
"However, conduct related matters have impacted our performance and I fully recognise that our recovery won't be complete until we've concluded them. We have learned lessons from this."
Its charge for bad and doubtful debts plunged by £473 million to £158 million, largely driven by its transfer of £5.6 billion of soured UK commercial property loans to its Australian parent.
NAB has now shrunk that book of problem loans to about £4 billion.
Britain's improving economy also helped cut losses on business and retail loans, while mortgage loss rates were stable.
The lender's core tier one capital ratio - a key measure of financial strength - improved to 10.8% from 8.4%.
Customer deposits shrunk 2.8% to £24.6 billion, but it said mortgages grew 7.5%, ahead of the market.
Higher lending margins and an "improved retail deposit mix" helped its net interest margin - the difference between what it makes on loans and pays out on deposits - improve to 2.12% from 2.03%.
Its Australian parent saw net profits increase 9% to 5.94 billion Australian dollars (£3.53 billion). NAB last year admitted attempts to sell Yorkshire and Clydesdale had been unsuccessful as it unveiled the deep cost-cutting drive.
Yorkshire and Clydesdale banks now have about 7,000 full-time UK staff and 323 branches.