It lost €962m in the first six months of the year, but only €199m in the second half thanks to the the scrappage deals.
However the company predicted continued tough times for the car market in the new year, with many schemes coming to an end.
European car sales were expected to be down by nine per cent, the company said.
Peugeot Citroen said that the recall of 97,000 cars at the start of February had a limited impact on its figures.
It recalled Peugeot 107 and Citroen C1 sub-compact models made at a plant it shares with Toyota in the Czech Republic.
Peugeot Citroen’s chief executive Philippe Varin said: “Our financial results for 2009 show a much improved performance in the second half, but still reflect the severity of the crisis affecting the automotive industry.
“In 2010, we expect the market conditions to be challenging, but we should continue to grow our market shares.”
Peugeot Citroen sales for the year were down more than 10 per cent at €48.4bn.
But the company said it expected the Chinese market to continue to grow strongly this year.