Barclays, Britain's third largest bank, has delivered a solid increase in group pre-tax profits for the first half of the year, but reported a 20 per cent jump in its bad debt charge and a 17 per cent slide in profits at its credit card business, Barclaycard.

Against predictions in some quarters of the City that Barclays would report a fall in earnings at the half-year stage, Barclays increased profits by 9 per cent to £2.69 billion from £2.5 billion at the same point last year.

Almost all of its businesses delivered substantial profits increases, including a 60 per cent jump at its fund management arm Barclays Global Investors and a near-40 per cent increase in its wealth management operations.

Barclays rapidly expanding investment banking division, which specialises in company debt and risk management, reported a 20 per cent increase in profits before tax to £703 million. But operating expenses, in part due to the dramatic growth of Barclays Capital under its chief executive Bob Diamond, rose by 14 per cent to more than £4.5 billion.

Mr Diamond hired 2,000 new staff last year and plans to double the size of Barclays Capital by 2008.

Moreover, pre-tax profits at Barclaycard slid by 17 per cent to £379 million - from £459 million in the same period last year - after the bank saw a large rise in repayment problems among customers using its credit cards. The bank also reported that it was finding it harder to recoup bad credit card debts.

Barclays, led as a group by chief executive John Varley, took an impairment charge against bad customer debts of £706 million - a 20 per cent increase on the charge it suffered in the period last year.

The bank pointed out that, in unsecured loans, the charge was rising at a slower rate. And it said the delinquency rate on mortgages was "steady" and had fallen among its corporate and wholesale customers.

It also said that UK Banking, which houses its high street banking operations, showed "good growth", with pre-tax profits up 10 per cent at the half year to £1.28 billion.

Mr Varley said: "We made good progress in all the main elements of the group's strategy, particularly our international growth plans." The bank has just bought South African bank Absa, in a deal that suffered delays gaining approval and shareholder support.

Mr Varley added: "The profit growth in the first half demonstrates that our strategy is delivering strongly and that we are benefiting from a mix of business that is well diversified by sector, income type and geography."

The dividend was increased by 12 per cent to 9.2p.

As he renewed Barclays commitment to double-digit income growth for the full year, Mr Varley also took a confident line on the economic outlook for the remainder of the year.

He said: "The economic outlook for the remainder of the year continues to be fairly positive. We expect the strong economic performances in the US and China to continue to benefit the global economy. Although the rate of growth in the UK is expected to be below the level of the past few years, it is still expected to be in line with the longer term trend."

Shares in Barclays rose nearly 3 per cent in opening trades in London this morning.

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