THE chief executive of Barclays said yesterday that the bank had plenty of scope for organic growth as he delivered first-half profits that beat forecasts.

John Varley said the bank was growing in nearly all its main businesses and announced that pre-tax profits were £2.6 billion — 9 per cent higher than last year and £200 million more than analysts had forecast.

The increase came despite a 20 per cent rise in provisions at Barclaycard, Britain’s biggest credit card company, which knocked first-half profits there by 17 per cent. Barclaycard’s profits were also hit by the costs of expanding abroad.

Mr Varley said: “Card businesses are periodically subject to downturns. This is something we understand. We have a lot of experience in managing these cycles.”

He said that Barclaycard was cutting back on credit limits for customers and turned down half of all applications.

The slump in profits at Barclaycard was more than offset by the performance of other parts of the business. At Barclays Capital earnings were 20 per cent higher than last year at £703 million even though the group hired 500 staff, raising expenses by 30 per cent.

BGI, the firm’s investment management division, also increased profits substantially. Its profit before tax climbed 60 per cent to £242 million, helped by a drop in the cost-income ratio which came down at the division from 64 per cent to 59 per cent. The bank added that bad debts were lower than had been expected. It also said that it did not foresee a further deterioration in credit quality.

The bad-debt charge for the first half stood at £706 million, 20 per cent up on the year, but slightly under the consensus forecast of £723 million. As a proportion of total loans, the charge fell to 0.51 per cent from 0.53 per cent a year earlier.

Mr Varley said: “(We expect) that risk will rise broadly in line with the size of the loan book.”

Concerns over a sharp rise in defaults on consumer loans have weighed on UK banks in the first half. HSBC, HBOS, Royal Bank of Scotland, and Lloyds TSB have all reported an increase in bad debts.

Barclays set an interim dividend of 9.2p per share, a 12 per cent increase on the same period last year.

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