Bradford & Bingley profits rose 8% in the first half of 2005 as it cut costs and overcame a drop in new lending.
The firm has seen a large drop in home loans
The bank said a slowdown in the UK's mortgage market was over its worst, and had been through "the trough".
"While the outlook in the first quarter was uncertain... people are much more confident about the second half," said chief executive Steven Crawshaw.
Underlying pre-tax profit for the six months to 30 June rose to £150m ($268m) from £139.4m at the same time in 2004.
Total underlying net income remained flat at £281m, but underlying costs fell 6% thanks to a cost-cutting programme introduced by Mr Crawshaw.
However, by the close of trade on the London market Bradford & Bingley's shares were down 3.55% to 325.75 pence.
Gross new home loans at the bank fell 40% in the first half of 2005 - from a record £4.1bn in the same period last year - but lending profit rose 8% to £120m as fewer existing mortgage holders moved away from its loans.
"The main reason for lower-than-expected income was that loans have only grown 1.4 % since the end of the year, and slowing volumes is an issue flagged by management," Merrill Lynch analyst James Invine wrote in a note.