Royal Bank of Scotland's pre-tax profit has risen to £1.14bn in the first half of the year from £15m a year earlier.
The bank reported an operating profit of £1.6bn compared with an operating loss of £3.4bn in 2009.
RBS, which is 84%-owned by the taxpayer, has announced 23,000 job losses worldwide since October 2008, including 17,100 in the UK.
It also announced it had sold an 80% stake in its payments business GMS, in a deal which valued the unit at £2bn.
RBS's results follow upbeat performances from Barclays, HSBC and Lloyds.
Chief executive Stephen Hester said the bank's five-year restructuring plan was "on track".
"We are making good progress with disposals and overall business restructuring," he said, but added that the rebuilding of RBS was "a marathon not a sprint".
RBS said that it had provided £14.4bn of gross new loans to small businesses, but that net lending to such firms fell - as companies paid back more debt than they took on.
Banks have been criticised for not doing enough to support firms during the economic downturn.
Like its rivals, RBS insists that in the current climate it cannot lend faster than its customers want to repay their existing debts.
The group's net interest margin - the gap between what it pays in interest and what it charges in loans - rose to 3.77% from 3.57% a year earlier
"RBS would of course point out that regulators are forcing it to hold more capital relative to assets, which forces it to charge relatively more for loans to maintain its return on capital," BBC business editor Robert Peston said.
He added: "The semi-nationalised bank does appear to be on the mend - although it's a long way from full strength."
Last year, RBS was told to sell branches by the European Commission to safeguard competition concerns after it was bailed out by the UK government.
The sale of the branches to Santander earlier this week includes 311 RBS-branded branches in England and Wales, and seven NatWest branches in Scotland.
Spain's Santander already owns the Abbey, Alliance & Leicester and Bradford & Bingley brands in the UK.
The sale will earn a premium of about £350m on the assets' value.
RBS also confirmed on Friday the sale of a majority stake of its credit card payment processing business, Global Merchant Services (GMS), in a deal that values the business at £2bn.
The private equity buyers, Advent International and Bain Capital, will get just over 80% of GMS, with RBS retaining the remainder.
RBS led a consortium that bought Dutch bank ABN Amro before the credit crunch in 2007, but the deal was a disaster, weakening its balance sheet and forcing the government to pump in about £45bn to keep the bank afloat.
The government paid an average of 50.2 pence for each of its 90.6 billion RBS shares it bought to save the bank from collapse. After the latest results were released, RBS's share price climbed 2% to near 53p.
But they later lost value, eventually closing down 1.7% at 51.1p.
There are not thought to be any government plans to sell its stake in either RBS or Lloyds any time soon - both in the hope of making a larger profit as the bank continues to strengthen and the feeling that such a move could threaten the fragile banking recovery.
RBS is also paying a fee for a taxpayer-backed insurance fund, known as the asset protection scheme. RBS has put £282bn in toxic debts into that fund and will bear the first £60bn of losses on these.
Figures from the bank suggested that repayments on those risky loans had been better than expected, our business editor said, which could ultimately allow the state to "pocket the handsome fee for the insurance and never pay out a penny to RBS".
Most of the banks reporting this week have reported an improvement in the amount set aside for bad debts, which has helped to boost the results overall.
Barclays reported pre-tax profits of £3.95bn for the first half of 2010 - up 44% on the same period last year.
Lloyds, which is 41%-owned by UK taxpayers, saw its pre-tax profit come in at £1.6bn, compared with loss of £4bn in the same period in 2009.
And HSBC reported pre-tax profits of $11.1bn (£7bn) for the first six months of 2010 - more than double its profits for the same time last year.
"A lot of this recovery is down to the recovery in the economy, with borrowers having less difficulty keeping up with loan repayments," our business editor said.