Barclays is the subject of bid rumours

The shares closed 3.7% higher at 500p on Friday, having risen as much as 11% earlier in the day.

Rumours of an imminent takeover offer from Citigroup were thought to be behind an initial surge in Barclays shares earlier this week.

The latest rally comes despite efforts by Barclays to dampen the speculation.

BARCLAYS UK's third biggest bank 75,000 employees Operates in about 60 countries More than 2,000 UK branches Annual pre-tax profit of �3.8bn Get Barclays share price

"We feel confident in our independence," Barclays deputy chief executive John Varley told the Guardian newspaper on Thursday.

Unusually high

City sources said the volume of Barclays shares changing hands on Friday morning was unusually high.

Barclays and Citigroup declined to comment on the bid rumours.

Barclays made pre-tax profits of �2.4bn in the six months to June, a 23% increase on the same period last year.

Speculation about mergers in the UK banking sector has increased since Abbey National said last month it had agreed to be taken over by Spain's Banco Santander Central Hispano, in deal worth an estimated �8bn.

Big US banks, eager for fresh acquisitions after a wave of consolidation at home, are also said to be turning their attention to the fragmented European market.

But some analysts were sceptical of the Citigroup rumours, saying Barclays had been buying back its own shares on Thursday.

Stock market rules prevent companies from buying their own shares if they have received a takeover approach.