U.K. bank Barclays PLC (BCS) Monday said first-half net profit rose 10%, as investment banking fees and trading gains offset higher credit-market provisions and 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.

Barclays became the latest global bank to report higher earnings due to investment banking operations. Credit Suisse AG (CS), Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and Deutsche Bank AG (DB) also said that their investment banking units help solidify first-half performance.

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 environment has remained very difficult in 2009 as a consequence of the onset during 2008 of economic recession in most parts of the world in which we operate. But we were nonetheless solidly profitable," Chief Executive John Varley said.

"As we navigate 2009, our governing objectives are unchanged. They are - staying close to our customers and clients, managing our risk and maintaining strategic momentum," Varley said.

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.

The results were helped by the acquisition and integration of North American assets acquired from Lehman Brothers, the bank said. Barclays President Robert Diamond said the good performance of investment banking arm Barclays Capital is sustainable.

Group 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.

At 0754 GMT, Barclays shares were up 3.1% at 312 pence while the FTSE100 index was up 0.6%.

Analysts from Shore Capital Stockbrokers said Barclays gave "a decent update" and said "strong balance sheet management" was a key positive." It said the pretax profit was slightly ahead its GBP2.8 billion forecast. Shore Capital kept its buy rating on the stock.

At a briefing, Varley said the bank is witnessing some signs that the rate of growth of its bad debts is slowing.

"In some of our loan books, we've seen the rate of deterioration reducing and some signs of stabilization," Varley told reporters.

"I don't want to overstate it because if you think about unemployment, for example, unemployment will rise in many of the economies where we do business and unemployment has a lagging effect on bad debts. But the rate of deterioration has moderated," Varley said.

The bank's impairment charges and other credit provisions in the first half of the year 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.

Varley also said a review on the company's remuneration policy is ongoing.

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

(Ishaq Siddiqi contributed to this article.)