Barclays reassured investors today with a 10% dividend increase, a mere 1% fall in profits last year - and the promise of 5% to 10% profits growth for each of the next four years. The shares, which had shot up 7% yesterday, lost 10p to 450p.

The bank also revealed that despite increasing its write-offs for sub-prime related investments from the £1.3 billion announced for the end of October to £1.6 billion by the year-end, its investment banking business once again made record profits.

That will mean that Bob Diamond, president of Barclays and head of its investment bank, is once again in line for a total pay package worth almost £15 million for the past year.

Diamond was repeatedly forced to come out and reassure investors last autumn that Barclays Capital continued to perform strongly despite the credit crunch. Today it revealed a 5% rise in operating profits to £2.34 billion.

That was a significant chunk of the global bank's pre-tax profits,which were just 1% lower at £7.08 billion compared with 2006's £7.14 billion.

Chief executive John Varley said it had been a "resilient performance in quite testing conditions".

He added: "In market conditions like this there are two major tests of a bank. The first is: Does its strategy work? And the second is: Does it have the right risk controls in place? We passed on both counts." Asked if the bank might still have to make further writedowns on the credit crunch he refused to rule them out but said: "If I look at our performance in the first weeks of this year, our income performance has been strong. So I feel appropriately realistic about the outlook, but quietly confident."

Varley said that the bank was budgeting for a downturn in growth in both the US and UK in the coming year but still expecting above average growth in emerging economies such as India and Africa where he has been concentrating Barclays growth.

In the UK Varley set a new target to improve the bank's costs as a proportion of income, which is already feeding through with improving market shares in mortgages and savings partly as a result of Northern Rock.

But Varley also wants to cut costs, which he admitted were ahead of some rivals. He would not be specific on job cuts but said savings would be made at both Barclays Bank and Barclaycard "operational centres".

Barclays total charge for bad debts rose 30% to £2.79 billion with almost all the increase accounted for by subprime exposure. UK retail and Barclaycard writedowns were 7% lower than a year ago with the credit card division's profits recovering strongly, gaining 18%.

Barclays lost out to a consortium led by Royal Bank of Scotland in the e70 billion (£50 billion) bid battle for Dutch bank ABN Amro which ran for much of last year. But because of an e200 million break-fee it had agreed with the Dutch, it actually booked a gain of £50 million on the bid costs.

The dividend for the year goes up 10% to 34p a share.

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