Barclays harvests record profit

BARCLAYS took the total first-half profits earned by Britain's big six banks over the £16bn mark today as it reported forecast-busting earnings.

Britain's third-largest bank saw its pre-tax profits soar by 23% to £2.41bn in the six months to June - some £200m better than the City expected.

Chief executive Matt Barrett said: 'The economic outlook for the remainder of the year looks healthy. The world economy continues to expand briskly, with the US performing strongly, the modest recovery in the eurozone persisting and Asia growing well.

'This provides a helpful backdrop for the UK, where growth remains above trend and is expected to do so for the rest of the year. It is an encouraging environment for Barclays clients and customers.'

But Barrett told investors that UK business was under-achieving: 'In UK banking where levels of productivity fall short of the benchmark, we expect to deliver a two percentage point improvement per annum in the costincome ratio for each of the years 2005, 2006, 2007.'

Barclays' profits surge was driven by its private-client and international business, which pushed profits up by 52% to £196m; Barclays Global Investors, which rose 73% to £157m; and Barclays Capital, which improved by 37% to £599m.

Barclaycard's profits rose by 11% to £428m and the largest division, UK Banking, increased its profit by 6% to £1.22bn. Bad debt provisions dropped by 10% to £589m. With earnings rising by 25% to 26.7p per share the dividend has been increased by a better-than-expected 17% to 8.25p.

Barrett, who moves up to become chairman next month, handing over the chief executive role to John Varley, said he expected the bank to continue to improve income and reduce costs.

Barclays shares shot up yesterday-on renewed speculation that a US bank, possibly Bank of America or Citigroup, was casting its eye over the bank once again. They rose 9 1/2p to 470p.

Bank of America held abortive preliminary talks with Barclays last year. Almost 100m shares were traded yesterday with similarly high levels of activity in the options and derivatives markets.