London - Manchester City halved their annual loss to £51.6 million in 2012/13 but appear set to breach a UEFA cap on how much money teams are allowed to lose.
Premier League City, owned by Abu Dhabi's Sheikh Mansour, had lost £97.9 million the previous year as they spent heavily on building a team to compete with Europe's top clubs.
Although City's finances are improving, UEFA's Financial Fair Play (FFP) rules cap headline losses at €45 million over the past two seasons.
There are a series of exemptions for older contracts and money spent on youth development that might help to reduce City's deficit under the rules set out by UEFA, European soccer's governing body.
"Growing revenues and controlled expenses are bringing the club to break-even in the immediate future and profitability thereafter," City chief executive Ferran Soriano said in a statement on Wednesday.
City said revenues rose to a record high of £271 million in 2012-13.
Clubs who fall foul of the FFP rules face a range of sanctions, with exclusion from the lucrative Champions League the harshest punishment.