UniCredit said in a statement that it chalked up net profit of 5.47 billion euros ($6.7 billion) last year, exceeding analysts' forecasts.
The year before, one-off items and writedowns had pushed the lender into a net loss of 11.79 billion euros.
UniCredit said 2017 full-year revenues edged 1.7 percent higher to 19.6 billion euros.
In the fourth quarter alone, net profit amounted to 801 millions euros, compared with a loss of 13.55 billion euros a year earlier.
"It was the bank's best fourth quarter in a decade," said chief executive Jean Pierre Mustier.
"2017 was a pivotal year for UniCredit," he said.
The bank's "Transform 2019 plan ... is already yielding tangible results, leading to a much improved financial performance and laying the foundations for the future growth and success of UniCredit."
The numbers seemed to convince investors, too, with UniCredit shares bounding up 2.7 percent to 17.95 euros, taking it 45 percent higher than a year ago.
UniCredit said its core tier-one capital ratio -- a key measure of a bank's underlying strength -- stood at 13.6 percent at the end of last year, only slightly below the very solid 13.8 percent seen in September.
The bank said its asset quality had improved with its net exposure to risk or non-performing debt down by 15.2 percent to 21.2 billion euros.
UniCredit was one of the worst-performing banks in stress tests conducted by the European Banking Authority (EBA) in 2016. And since he took over as CEO in July of that year, Mustier has embarked on a massive shake-up.
This has included a 13-billion-euro capital increase, the disposal of a number of assets such as Bank Pekao and Pioneer, and a 17.7-billion-euro gross reduction in non-performing loans.
The bank also plans to slash 14,000 full-time equivalent jobs, of which 9,000 have been achieved so far.
Since the end of 2015, UniCredit has closed 682 branches or 72 percent of the 944 planned by 2019.
"Transform 2019 is ahead of schedule and costs were down four percent in the year. All the 2019 targets have been confirmed," said CEO Mustier.
UniCredit is pencilling in net profit of between 3.7 billion and 4.7 billion euros in 2018 and 4.7 billion euros in 2019, when the core tier-one ratio is projected to come out at 12.5 percent.