Permanent TSB Group Holdings has reported a pre-tax loss of €48m for 2014, a significant improvement on the €668m loss for the previous year.
When exceptional items are excluded, the bank recorded a profit of €5m for the year.
Shares in PTSB were 9.5% higher in Dublin trade today.
The bank - which is 99.2% State owned - also announced this morning that its restructuring plan has been approved in principle by the European authorities.
The bank was the only Irish financial institution to fail the Europe-wide stress tests last October.
The tests identified a €855m shortfall on its balance sheet at the end of 2013, although its chief executive said most of this had been accounted for since.
Permanent TSB said it intended to raise €525m from private investors. It will use €400m of this to repurchase convertible contingent capital notes from the State.
Known as CoCos, these are a form of bond held by the State as part of the bailout. However, they carry a high interest rate and are expensive for the bank.
The bank said today that its profitability was boosted by an impairment writeback of €42m. This compares to an impairment charge of €929m in 2013.
PTSB said the writeback was due to continuing improvements in the mortgage arrears situation at the bank and higher house prices.
On mortgage arrears, the bank said the number of customers in arrears of over 90 days fell by 8,000. That was a reduction of a third on the peak figure reached in 2013.
The group says it has offered almost 27,000 solutions to mortgage customers in arrears and about 90% of the new agreements are been adhered to.
The lender said that new mortgage lending jumped to 105% to €429m last year from €209m in 2013, while term and credit card lending rose by 18%.
It also said that its Irish retail deposits grew to €14.3 billion from €13.6 billion, with a 21% rise in current account balances.
Permanent TSB also announced today that it has signed agreements to sell €5 billion of non-core assets, including €3.5 billion of its Capital Home Loans mortgage book in the UK.
It said that when the deal is completed, it will have deleveraged 50% of the CHL loan book, adding that it intends to continue the sale of the remaining CHL assets as agreed in its restructuring plan.
The group has also agreed the sale of two portfolios of non-core loans backed by commercial properties in Ireland for an undisclosed sum.
"Today's announcements heard a series of moves which will, on completion, transform the Permanent TSB Group and start the process of returning the group to the private sector as a stand-alone competitive and successful force," commented the bank's group chief executive Jeremy Masding.
Noonan welcomes strong progress at Permanent TSB
Finance Minister Michael Noonan said that Permanent TSB has made strong progress since the bank's new management team was appointed in 2012.
He said that while he welcomed the vast improvement Permanent TSB has made in reducing the levels of arrears, further work is required to ensure the progress made during 2014 is sustained.
"Permanent TSB is also providing much needed competition in the Irish banking sector, and the new mortgage lending levels of €429min 2014 highlight this," Mr Noonan added.
The Finance Minister said the bank's plans to raise capital from private sources are the first step in returning the bank to private ownership. The move will allow the State to recoup about €400m of the €4 billion invested during 2011/2012 in Irish Life & Permanent (now Permanent TSB).
He said Europe's approval in principle of the restructuring plan and the significant progress announced today in deleveraging its non-core portfolios underpins the bank’s viability and provides further clarity to potential private equity and institutional investors in the capital raise process.