Barclays PLC (BCS) Monday said first-half net profit rose 10% as investment banking fees and trading gains offset weaker performance in its retail arm, and said it expects the rest of the year to be challenging.

Net profit for the six months ended June 30 was GBP1.89 billion, up from GBP1.72 billion in the same period last year.

The result was lower than the GBP1.96 billion average net profit expected by five analysts polled by Dow Jones Newswires.

The company said it expects the rest of 2009 to be challenging, "with continuing recession in many of the economies in which we are represented."

The biggest chunk, or 35%, of pretax profits came from the bank's Barclays Capital investment banking division, which has boosted revenue this year from higher customer volumes in areas including interest rates and currencies, and capital markets activity such as underwriting bond sales.

But as the investment bank bounced back from a weak 2008, bread-and-butter lending to retail and commercial customers was hit by rising impairments on corporate and consumer loans.

Impairment charges and other credit provisions rose to GBP4.56 billion, from GBP2.45 billion in the first half of 2008. The result was higher than the GBP4.32 billion average expected by six analysts surveyed.

Pretax profit for the six months ended June 30 was GBP2.98 billion, up 8% from GBP2.75 billion previously, but lower than the GBP3.6 billion average pretax profit forecast by six analysts.

Barclays shares have doubled this year as concerns about further bank collapses and a prolonged recession receded. U.S. banks' strong second-quarter earnings last month, driven by investment banking, also raised expectations that Barclays would be a big beneficiary of market activity.

The bank isn't paying dividends in the first half. In the first half of last year, it paid 11.5 pence a share. It said it intends to resume paying dividends before the end of the year.

On Friday, Barclays shares closed down 1% at 302 pence, giving it a market capitalization of GBP33.78 billion.

Company Web site: http://www.barclays.com

-By Vladimir Guevarra and Margot Patrick, Dow Jones Newswires; +44 (0)20 7842 9451; margot.patrick@dowjones.com