The Asia-focused bank said it would not take "knee-jerk actions" and vowed instead to cut costs and shrink its loan book in an effort to quell concerns about its capital strength, the main task facing its new chief executive Bill Winters.

The bank is already braced for a fundamental overhaul when the former investment banker takes over as chief executive in June, with analysts and investors expecting him to launch a multi-billion pound rights issue to reboot capital after a prolonged slump in profits.

"It's the million-dollar question: has Bill Winters signed up for these targets?" said Mike Trippitt, analyst at brokerage Numis Securities.

"You can't sit there waiting for the cavalry to arrive and you've got to get on and run the business ... but he (Winters) is going to go through business unit by business unit and decide which ones to keep, what to grow and what to sell."

The bank's share price was up 3.7 percent at 1010 pence by 7.45 a.m. ET, still down by 25 percent since the start of last year.

However, the price has rallied by 9 percent since Winters' appointment was announced last week, part of an investor-led purge of top brass including veteran chief executive Peter Sands, three non-executive directors and the bank's head of Asia, Jaspal Bindra.

Chairman John Peace will also step down amid disquiet at management's failure to deal quickly with concerns about strategy and rising bad loans.

After a one-third rise in losses from bad loans last year to $2.1 billion, mainly due to problems in China, India and among commodities firms, the bank admitted: "With hindsight, there were clients and situations we should have avoided."

That dragged down underlying pretax profit last year to $5.2 billion, the second successive annual fall after a decade-long run of record profits came to a screeching halt in 2013 as Asia's credit binge turned sour.

AFTER THE STORM

Sands described 2014 as a perfect storm of falling commodity prices, persistent low interest rates and negative sentiment toward emerging markets.

It was premature to call the peak on bad debts but the bank said it had seen no sign of further deterioration this year and had cut its loans to commodities firms by $6 billion to $55 billion.

It also cut its staff bonus payments pool by 9 percent to 667 million pounds and said none of the directors who was at the bank all year will get a bonus for last year, although that did not include Finance Director Andy Halford, who joined in July.

Sands, who more than doubled the size of the bank since taking over the helm in 2006, said the bank would now aim to save $1.8 billion from 2015 to 2017, making small disposals and cutting between $25 billion and $30 billion in risk-weighted assets from its balance sheet.

The bank is now aiming for a return on equity of above 10 percent, lower than the mid-teens percentage the bank had previously sought, and a core capital adequacy ratio of 11-12 percent of risk-adjusted assets from this year onwards, having fallen to 10.7 percent at the end of 2014 from 11.2 percent at the end of 2013.

The cost savings will come from $400-500 million of efficiency improvements a year and $300-600 million from selling or closing more underperforming businesses.

The bank wrote down the value of its loss-making Korea business by $726 million, following a $1 billion writedown in 2013. It is closing branches and reshaping operations there.

"2014 was clearly disappointing," Sands said. "I am confident the way we are reshaping the bank will get us back to a trajectory of profitable, sustainable growth.

"We acknowledge that investors have been concerned about capital, risk, costs and income growth," he said.

However, Winters is expected to take a harder line on the bank's costs and sprawling structure, which have been likened to a collection of fiefdoms.

"I suspect that Winters will want to be reasonably unfettered when he starts, so I cannot see the targets of an outgoing CEO being binding," one top-20 investor said.

(Additional reporting by Sinead Cruise; Writing by Carmel Crimmins; Editing by David Holmes and Greg Mahlich)

By Steve Slater