By Margot Patrick 

LONDON-- Barclays PLC on Tuesday raised its provision for potential foreign-exchange settlements to GBP1.25 billion ($1.92 billion), leading it to report a full-year net loss, but said an effort to shrink and restructure its business is starting to pay off.

Chief Executive Antony Jenkins said the bank is in its best shape since the financial crisis, with a stronger capital base and falling operating costs. Barclays cut around 5% of its workforce last year, to 132,300 from 139,600. More than 2,000 of the cuts were in Barclays's investment bank, and a further 5,000 of the remaining 20,500 investment banking jobs are set to go over the next two years.

Mr. Jenkins told the British Broadcasting Corp.'s Today program that he felt justified in accepting a GBP1.1 million bonus for 2014 because of the progress. He had turned down a bonus last year in part because of the costs of past misconduct. Conduct and litigation charges rose 15% in 2014, to GBP2.8 billion from GBP2.44 billion, including a fresh, GBP750 million provision in the fourth quarter for a global investigation into foreign-exchange markets.

Barclays along with around a dozen banks is being probed for alleged manipulation in the foreign-currency market. A group of six banks were fined $4.3 billion in November by regulators in the U.S., U.K. and Switzerland.

"I share the frustration of colleagues and shareholders that matters like these continue to cast a shadow over our business," Mr. Jenkins said in a statement alongside the bank's annual results.

"Resolving these issues is an important part of our plan for Barclays and, although it may be difficult, I expect that we will make significant progress in this area in 2015," he said.

Still, uncertainty around potential settlements and final costs helped send Barclays shares 3% lower in early trading in London.

Barclays said last year's job cuts helped reduce costs in the year by GBP1.8 billion, pushing adjusted pretax profit for the year up 12% to GBP5.5 billion from GBP4.9 billion. The bank posted a GBP1.68 billion net loss in the fourth quarter, bigger than a GBP642 net loss in the last three months of 2013, largely because of a revaluation of loan portfolio held in its noncore division.

Provisions and charges resulted in a full-year net loss of GBP174 million, compared with a GBP540 million net profit in 2013.

Analysts said the results showed the bank is making good progress on its strategy. Mr. Jenkins started his cost cutting effort two years ago and stepped up the plan last year by taking an ax to the investment bank.

"The key to the outlook will be how quickly Barclays can settle the outstanding legacy misdemeanors that it continues to provision fines for, " said Lewis Sturdy, a dealer at London Capital Group.

Among a long list of legal issues, Barclays said another, unnamed regulator is looking at aspects of a continuing investigation by U.S. and British prosecutors over a deal Barclays struck with a Qatari investment vehicle while raising funds in 2008.

The bank said it is also providing information to the U.S. Department of Justice as part of the agency's investigation into precious-metals markets.

Write to Margot Patrick at margot.patrick@wsj.com

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