Barclays warns of tough year as profits fall 14 per cent

"If 2008 was the year of the banking crisis, then 2009 is the year of the economic crisis," he declared as Barclays revealed a 14 per cent fall in profits to £6.1 billion for last year.

That was higher than Varley and chairman Marcus Agius told the City last month in their unprecedented open letter and more than most analysts had expected.

Barclays shares rose 10½p to 115.3p. But they have fallen by almost 80% in the past year and Varley apologised once again to investors.

He said: "Our shareholders have suffered a lot and we greatly regret the fact that the total return on our shares during 2008 has been heavily negative."

The bank is not paying a final dividend but Varley said it was committed to a payout in the second half.

Total writedowns on toxic loans and bad debts soared to a gross £8.1 billion.

Profits were flattered by several one-offs, including £2.3 billion of gains from the takeover of the bust Lehman Brothers operations in the United States, £326 million from selling the bank's closed life assurance business and £291 million from the flotation of Visa and shedding its stake in MasterCard.

Varley said that he was particularly pleased that despite the chaos in the banking world Barclays had managed to increase its net income - albeit by only 1% to £23.1 billion.

He also revealed that bonuses across the group had been cut by almost 50% with "the more senior the people, the greater the reduction."

The bank intends to ensure a greater proportion of bonuses are deferred and a higher part paid in shares or share options rather than cash, he said.

Barclays did not take part in the Government's £37 billion bailout, choosing to raise £13.6 billion from Middle East and existing investors.

Despite his caution, Varley said the new year had started well. "Customer and client activity levels were high in the first month of 2009 and we have had a good start to the year.

"In particular, the operating performance of Barclays Capital, benefiting from the integration of Lehman Brothers North America, was extremely strong," Varley said.

But the bank warned it expects bad loans to rise from just under 1 per cent of total balances to as much as 1.5 per cent in 2009.