U.K. bank Barclays PLC (BCS) Monday posted a 10% rise in first-half net profit as it benefited from its purchase last year of Lehman Brothers' North American investment banking assets, which helped boost the performance of its own investment bank, Barclays Capital.

The strong performance from investment banking offset higher credit-market provisions and weaker performance in its retail arm, and Barclays said economic slowdowns and rising unemployment in the countries it operates in would make the rest of the year 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 investment banking units help solidify first-half performance.

Barclays 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.

The biggest chunk, or 35%, of pretax profits came from Barclays Capital, 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 assets acquired from Lehman Brothers, said Barclays President Robert Diamond, who heads Barclays' investment banking and investment management division, including BarCap.

He said BarCap's earnings are sustainable in the near term, due in part to possible investment opportunities in key markets like Asia, China, Germany, France and the U.S., which have recently shown some signs of economic growth.

"If there are signs of growth, which we think there are, the consolidation in investment banking, with fewer and stronger participants, has benefited Barclays Capital very much," he told Dow Jones Newswires.

Group pretax profit, a closely watched figure among U.K. analysts, was GBP2.98 billion for the half, up 8% from GBP2.75 billion a year earlier, but lower than the GBP3.6 billion average 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 earnings last month, driven by investment banking, raised expectations that Barclays would be a 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 1055 GMT, Barclays shares were up 8.1% at 327 pence, while the FTSE 100 was up 1.3%.

Oriel Securities analyst Mike Trippit said Barclays posted "reasonably strong numbers," helped by a good performance by BarCap, noting that Barclays' 37% increase in total revenue to GBP16.25 billion allowed it to absorb rising costs and bad debts.

Shore Capital analysts 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 said. "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."

The bank's impairment charges and other credit provisions in the first half rose to GBP4.56 billion from GBP2.45 billion a year earlier. The result was higher than the GBP4.32 billion average expected by analysts.

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

-By Vladimir Guevarra, Dow Jones Newswires; +44 (0)20 7842 9486; vladimir guevarra@dowjones.com

(Ishaq Siddiqi and Margot Patrick contributed to this article.)