Barclays has beaten City expectations

The bank said pre-tax profits for the six months to June rose 23% on the year to �2.4bn, ahead of City forecasts of about �2.2bn.

Barclays' investment banking arm, buoyed by a financial market upturn, accounted for the bulk of the increase.

Chief executive Matt Barrett said the bank had enjoyed a 'record' half-year.

He added that Barclays looked set to benefit from an improving economic climate in the months ahead.

Confidence

"The economic outlook for the remainder of the year looks healthy," he said.

"It is an encouraging environment for Barclays clients and customers."

City investors welcomed the figures, marking Barclays shares 2.2% higher to 480.5p by mid-morning on Thursday.

Deputy chief John Varley said Barclays was keen to expand its business, but would not comment on whether it was considering a bid for British mortgage lender Abbey National.

Abbey last month accepted a takeover offer from Spanish banking group Santander Central Hispano, prompting speculation that rival offers could emerge.

Barclays sought to dispel fears that investment banking revenues could fall off in the months ahead, saying growth in the second half had been driven by repeat business from existing clients rather than volatile securities trading.

The bank added that costs rose 15% to �3.9bn, lifted by a programme of investment in its branch network.