Barclays took a £750m charge in the fourth quarter as it prepares to settle allegations its traders manipulated foreign exchange markets, overshadowing the bank's efforts to slash costs and boost profits.
Past conduct problems continue to dog Barclays' chief executive Antony Jenkins.
But despite the burgeoning budget for litigation he accepted his first bonus since taking charge three years ago, helping to boost his total pay to £5.5m from £1.6m in 2013.
The British bank said today it had made an adjusted pretax profit of £5.5 billion last year, up from a restated £4.9 billion in 2013 and above the average analyst forecast of £5.3 billion.
But including charges, provisions and restructuring costs of £1.2 billion, pre-tax profit fell 21% to £2.3 billion.
Barclays increased its litigation provision by 250% to £1.7 billion, but Jenkins said the bank would make significant progress this year in resolving the forex probes.
"I regard the behaviour at the centre of these investigations as wholly incompatible with our values, and I share the frustration of colleagues and shareholders that matters like these continue to cast a shadow over our business," the CEO said.
Barclays pulled out of settling allegations its traders tried to rig foreign exchange benchmarks in a deal between US and UK authorities and six rival banks in November because it had not reached a deal with New York's regulator.
The bank said it wanted to settle the allegations with as many agencies as possible, as quickly as possible, but gave no further guidance on likely timing.
In addition to probes by Britain's Financial Services Authority, the US Commodity Futures Trading Commission and New York's Department of Financial Services, the US Department of Justice (DoJ) is in the final stages of its own inquiry.
The bank said the outcome of the forex probes could violate a non-prosecution agreement it has with the DoJ, which started in 2012 when it was fined for rigging Libor rates and runs until the end of June.
It means if the DoJ finds any wrongdoing in FX activities it could come down harder on the bank.
Barclays is also being investigated by US and UK authorities into the circumstances around its 2008 fundraisings with investors in Qatar and the bank said another unidentified regulator is also looking at a third-party relationship related to that event.
Barclays also set aside an extra £200m in the fourth quarter to compensate British customers who were mis-sold insurance products.
Under Jenkins, Barclays has abandoned its ambition of being a Wall Street powerhouse, shrinking its investment bank in favour of a return to its retail roots.
The appointment of John McFarlane, chairman of insurer Aviva, as chairman of Barclays has raised expectations the downsizing of the investment bank could accelerate under his watch.
At Aviva, McFarlane sold dozens of units in a revamp.
Barclays said its investment bank had a good start to 2015 but 2014 was a year to forget, with pre-tax profit sliding a third due to a weak trading performance.
Returns in the business were just 2.7% last year.
Elsewhere, pretax profit at Barclays' personal and corporate banking division, its main profit driver, rose 29%, boosted by a drop in impairment charges.
The bank's bonus pool dropped 22% to £1.86 billion. Jenkins took an annual bonus of £1.1m and also a role-based allowance, used by banks due to bonus restrictions, of close to £1m.
