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The BBC's Adam Kirtley
"In terms of public affection Barclays is deeply in debt"
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Thursday, 3 August, 2000, 16:14 GMT 17:14 UK
Barclays profits leap
Barclay's cash machine
Barclays led a campaign to charge non-customers for machine usage
One of the UK's largest banks has seen its pre-tax profits jump to 1.84bn in the first half of the year.

This is almost double the 967m pre-tax profit it made in the same period last year.

News of the bank's bumper profits follow an announcement earlier this year that it planned to close 171 branches, a decision which left many communities without a bank and angered consumers.

Barclay's decision reignited the argument over whether banks were sacrificing customer service in order to boost profits.

Many high street banks now find that they have to compete with internet banks, which have much lower cost levels and can undercut them.

For some the easiest way to cut costs and boost profits is by closing branches. Barclays chief executive Matthew Barrett has vowed to cut costs by 1bn by 2003.

Barclay's formula

Barclays is better placed than most to survive in this new marketplace, analysts said on Thursday, attributing its strong results to the fact that it had a diverse mix of banking businesses.

It was also one of the first 'bricks and mortar' banks to move into online banking, and it boasts that it is now getting 450,000 hits a week.

"I liked the results, they were particularly strong in revenues. Despite margin pressure on the consumer lending business, their range of businesses allow them to increase volumes," Alan Weatherston at brokers Collins Stuart said.

The bank said its strong profits were driven by the acquisition of new customers in all its businesses.

"The diversification of our portfolio of businesses, customer segments and geographic coverage makes us less vulnerable as a group to market discontinuity in any one product or market place," group chairman Peter Middleton and group chief executive Matthew Barrett said in a joint statement.

New customers

But while it might have attracted new customers, the competitiveness of the market has forced it to offer lower-priced products.

It has seen its net interest margin - a measure of the profitability of lending - fall to 3.17% from 3.5% last year.

Barclay's retail banking division increased its operating profit by 32% to 822m.

Operating profit in corporate banking jumped 18% to 541m.

Underlying operating profit rose nearly 24% to 1.770bn. Its pre-tax profits were in part boosted by a 178m one-off gain from the sale of its Dial fleet leasing arm.

The bank announced that its interim dividend will be 20 pence, compared with 17.5 pence previously.

The bank said it still needed to improve its share of the mortgage banking market.

It saw its mortgage business grow by 8%, but this was not enough for it to increase its market share.

"We need to do a lot better in the mass mortgage market. We plan to roll out more product features, more distribution, more sales force...We are generally going to become more active, more aggressive," Mr Barrett said.

Barclays shares closed down on Thursday, from 1615p to 1556p.

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