Barclays will cut a further 7,000 jobs in the division and create a bad bank arm with £115 billion of non-core assets, including European retail banking.
With chief executive Antony Jenkins calling the moves a "bold simplification" of the business, shares rose nearly eight per cent, or 19.2p at 262.5p, to leave Barclays at the top of the FTSE 100 risers board.
The top flight was 42.8 points higher at 6,839.3 after global markets were cheered by Federal Reserve chairman Janet Yellen's vow that low interest rates will continue until the US job market is healthy.
It is a view shared by the Bank of England in the UK as policymakers voted to keep interest rates at 0.5 per cent for another month despite recent encouraging signs for the UK economy.
Expectations that the Bank will raise rates early next year meant sterling continued to hover beneath 1.70 against the US dollar, while the pound rose to an 11-week high against the euro at 1.22 after the European Central Bank president Mario Draghi said he was ready to increase stimulus next month in a bid to boost the recovery of the European economy.
Barclays was joined at the top of the FTSE 100 risers board by BT Group after the telecoms giant announced a six per cent rise in annual profits to £2.8 billion and said it will hike its full-year dividend by 15 per cent.
Supermarket Morrisons also made a surprise appearance on the risers board, despite more poor trading figures, with like-for-like sales down by 7.1 per cent in the 13 weeks to May 4, compared with a 4.5 per cent drop forecast in the City, ending 8.1p higher at 198.9p
Pharmaceuticals giant AstraZeneca was also stronger amid speculation that US rival Pfizer is planning to return with a takeover proposal worth as much as £53 a share, valuing the business at around £67 billion. Astra shares were 82p higher at 4713p, having fallen in recent days.
Centrica was almost two per cent or 6.4p lower at 320.4p as it downgraded its profits guidance for this year, partly due to pressures on its British Gas residential supply business following a mild winter and increased competition.
Accounting software firm Sage was the leading faller in the top flight after it announced that Guy Berruyer is to stand down as chief executive after four years in the role. Shares fell 22.5p to 399.5p.
The biggests risers in the FTSE 100 Index were Barclays up 19.2p at 262.5p, Morrisons up 8.1p at 198.9p, Arm Holdings up 30p at 901.5p and Tesco up 9p at 295p.
The biggest fallers were Sage down 22.5p at 399.5p, Randgold Resources down 173p at 4530p, Petrofac down 33p at 1388p and Centrica which ended down 6.4p at 320.4p.