Barclays' chief executive said today that he was certain the Treasury would prevent Northern Rock from competing unfairly with Britain's high street banks.

Speaking at the announcement of Barclays' full-year figures for 2007, John Varley said that the Treasury could be trusted to take into account the sensitivities of having a new state-backed lender. "I can understand in theory how historically an aggressive competitor being nationalised would cause concerns [but] I think the Government understands this issue," he said. "I think the playing field will be kept level".

Mr Varley refused to comment on whether the Northern Rock debacle had damaged Britain's standing as the world's leading financial centre. "That's a chapter of history that's mostly behind us," he said.

Barclays' results had been keenly awaited by the market as a signal of the effect on UK banks of the credit crunch that sent Northern Rock to the edge. Alliance & Leicester and Lloyds TSB will report their 2007 figures later this week.

Barclays revealed a £36 billion exposure to the credit markets but reported a writedown of just £1.6 billion, which was lower than expected. The bank unveiled flat pre-tax profits of £7 billion for the 12 months to December 31, down 1 per cent on last year. It raised its dividend by 10 per cent, from 31p to 34p. The shares dropped 2 per cent or 10p to 450p in early trading, though, as investors reeled from Credit Suisse's revelation that it would take a $1 billion hit to its first quarter results for 2008. On Friday Switzerland's second-largest bank announced writedowns of just SwFr2 billion for 2007 but yesterday admitted that several traders were being investigated after some of its asset-backed securities were over-valued by £2.8 million.

My Varley also issued a sober forecast for 2008, predicting a slowdown in the economies of the developed world. "In particular, we expect economic growth in the UK and the US to be below the trend of recent years," he said.

Barclays Capital, the bank's investment banking business, increased its writedown on credit products from £1.3 billion, announced last year, to £1.6 billion. The writedown would have been higher but was offset by a £658 million fair value increase of the bank's own credit notes. The bank took a total of £2.7 billion worth of charges, up 30 per cent on the previous year, including the investment bank's writedown.

Despite the credit market charge, BarCap reported a 5 per cent increase on 2006's record profits with a pre-tax result of £2.3 billion.

Bob Diamond, Barclays' president and the head of BarCap, said that he expected there to be a "two to three-year workout in terms of sub-prime" but that further writedowns at the bank would be dictated by whether the global financial environment improved over the first half of this year.

Barclays revealed for the first time its £12.3 billion exposure to commercial mortgages but Mr Diamond pointed out that £11.1 billion of these were direct loans to risks evaluated by the bank, rather than investments in commercial mortgage-backed securities. The bank also has £4.9 billion exposure to so-called Alt-A mortgages, which are less risky than sub-prime and are usually lent to people without credit histories or those who self-certify their income. Barclays has a £1.3 billion exposure to monoline insurers but has not yet called on the insurance.

The bank's international retail and commercial banking business saw a 23 per cent fall in profits to £935 millions. This year's figures from the division were also hit by a 12 per cent fall in the average value of the South African rand. Absa, the South African bank, is one of Barclay's largest subsidiaries.

UK retail banking saw its pre-tax profit rise 9 per cent to £1.2 billion and the bank said that mortgage impairment charges remained negligible. Mr Varley said that, despite reports to the contrary, banks were still keen to lend of consumers who presented a good risk. "This bank certainly hasn't stopped lending," he said.

The profits were broadly in line with analysts' expectations.

The bank's economic profit, which takes into account the cost of capital and the goodwill already existing towards the bank, was down from £2.7 billion in 2006 to £2.2 billion last year.

The bank said that although it had achieved a cumulative £8.3 billion in economic profit, ahead of its targets, over the last four years, it was still in the third quartile of its peer group on total shareholder return — a result that it described as a "disappointing outcome".

Collins Stewart analysts were positive about the Barclays results and what they might indicate for the figures to come from Lloyds TSB, Royal Bank of Scotland and HSBC.

Alex Potter of Collins Stewart said that the Barclays writedown was better than feared, while the increased dividend was "an important vote of confidence".

Analysts at Keefe Bruyette & Woods, however, questioned the "prudence" of the writedown announced today and said that stockmarket bears would continue to be concerned about the near-term outlook for BarCap's revenues.

Shares in the bank had risen to 21p to 481.5p each at 3.15pm.