Is it permissible to use the interest from a bank deposit to pay off part of a friend's loan from a usurious bank, and what are the legitimate ways to spend it if that is not permissible?

It is not permissible for the holder of usurious gains to benefit from them. Rather, they must be disposed of by spending them on the interests of Muslims or on the poor. If your friend repents and is poor and in need, there is no harm in giving him these usurious gains so that he may repay what he borrowed from the usurious bank. However, if he is not in need, then they should be spent on the general interests of Muslims. It is forbidden to deposit money in a usurious bank except out of necessity. In such a case, the usurious gains are to be spent and not benefited from.