Close Brothers Group shares rose 11% to 430p in early deals after the lender said growth had returned and its cost-cutting was running well ahead of plan.
All of its divisions grew their loan books in the final quarter of the year to 31 July, and the bank expects underlying growth of 5% to 10% in the current year.
Chief executive Mike Morgan said the group was now a simpler, more focused specialist bank.
He remains committed to delivering a double-digit return on tangible equity, a key measure of bank profitability, by the 2028 financial year.
That compares with 5.5% last year.
Savings ahead of schedule
Close Brothers delivered about £36 million of annualised cost savings, well ahead of its £25 million target.
It now expects savings to top £60 million by the end of the current financial year, helped by offshoring, outsourcing and a smaller property footprint.
Costs are expected to hold at about £430 million this year, with savings broadly offsetting inflation and investment in growth.
The group has sold its Winterflood broking arm and its brewery container rentals business, leaving it focused on specialist lending.
Motor finance shadow
The overhang is the regulator's compensation scheme for car loan customers who were not told about commissions paid to dealers.
Close Brothers added about £165 million to its provision during the year, taking the total to around £320 million.
Parts of the scheme are suspended while legal challenges are heard, with hearings due in December or February.
Until there is more clarity, the bank will not pay a final dividend.
Profits down, capital strong
Adjusted operating profit fell 17% to £120.3 million, as income slipped 6% following the business repositioning and tougher property markets.
On a statutory basis, the pre-tax loss narrowed to £60.3 million from £122.4 million.
The loan book was flat at £9.5 billion, but grew 4% in the second half on an underlying basis.
The common equity tier 1 (CET1) ratio, the core measure of a bank's capital strength, rose to 14.1%, above its 12% to 13% target range.
Close Brothers says that gives it room to absorb new Basel 3.1 capital rules from January, which will knock about 0.8 percentage points off the ratio.
