The firm posted a £31.1m pre-tax profit in the year to the end of December, swinging from a £103.7m loss in the previous 12 months, and is now three years into its current turnaround plan.

The bank says that its return to profit was driven by balance sheet growth and improved margins.

The bank says its total assets of £29.3bn lifted by £3.7bn in the year, largely due to £2.4bn in net mortgage lending and higher cash balances.

In December, the Co-op told its current mortgage servicing operations provider Capita that it would move this unit in-house by December of this year.

In an update, Co-op says: “We believe it is the right time for the group to welcome its mortgage servicing activity and colleagues back into the business to ensure provision of a consistent end-to-end service for mortgage customers.

“We are working closely with Capita to ensure a safe reintegration and support for the incoming team to enable a seamless transition for our mortgage customers.”

Chief executive Nick Slape adds: “We are working more efficiently and effectively and in the year ahead we will complete the in-housing of all mortgage servicing as we continue to take steps to transform our operations.”

The bank says it spent £28.8m on strategic project costs in the period “targeted primarily at SME investment, mortgage system transformation and IT simplification”.

It says its average core mortgage loan to value ratio edged higher to 56.8% from 56.1% a year ago.

While core mortgages that are more than three months in arrears were lower at 0.13% from 0.18% in 2020.

The Co-operative Bank has struggled to return to profit since 2011, when a £1.5bn black hole was found in its accounts after its 2009 takeover of the Britannia Building Society, which led to the bank having to be rescued by hedge funds in 2013.