Carige said net profit in January-March was 6.4 million euros (5.6 million pounds) compared to a 41.1 million euro loss a year earlier. Loan writedowns dropped 83 percent from a year earlier.

In a sign of improving trends, income from the lending business rose 5 percent from the last quarter of 2017 and fees were up 7 percent quarter-on-quarter.

The bank raised capital from investors at the end of last year to write down bad debts and sell them off, using also its junior bonds to strengthen its capital.

Core capital stood at 12.1 percent of assets in the first quarter and total capital at 12.3 percent, which is below a bank-specific requirement set by the ECB at 13.125 percent.

The bank said it was working to lift the two ratios, respectively, to 13.4 percent and 13.6 percent.

(Reporting by Valentina Za; editing by Agnieszka Flak)