Shares in British clearing bank Barclays rose more than 10 per cent yesterday as it raised its first half profits and increased its potential for share repurchases this year to £700 from £500 million.

The shares reached a high of 1,465p, a gain of 137.5p, before falling back in afternoon trading, to stand a 105p higher at 1,432p at the close

Barclays' profit figures were complicated by the repercussions of Britain's budget and currency translations but before one-off charges, pre-tax rose 8 per cent to £1.376 billion, reflecting an 11 per cent rise in operating profit.

The figures were within expectations as was a 17 per cent dividend rise to 13.5 pence per share and these factors, added to the buy-back news and a better performance from the bank's investment banking unit BZW, led to the share rise.

But even banking analysts who praised the results were surprised by the extent of the share price increase.

"They're awful good results," said Mr John Leonard of Salomon Brothers, "but 10 per cent is a large move even if they were good."

Mr Leonard, a buyer of the shares, said he would prefer National Westminster Bank shares at these levels.

"With Barclays at this level, my enthusiasm is moderate," he said.

UBS' Mr John Aitken is a seller of the shares and said the results were unexceptional.

He was disappointed by Barclays' treatment of some of the figures which he said flattered the performance of the bank on costs, margins and on the relative size of BZW which investors are happier with looking small.

Both Mr Aitken and Mr Leonard raised their 1997 full-year pre-tax profit forecasts to £2.575 billion and £2.555 billion respectively from £2.440 billion and £2.448 billion.

Chief executive Mr Martin Taylor said the decision to raise the potential for buy-backs was taken simply because the bank's capital position is stronger than he had expected at the beginning of the year when prudent assumptions were made.

Barclays has already bought back shares worth £290 million this year and so has potential for a further £410 million of repurchases.

Mr Taylor repeated his aversion to acquisitions for their own sake and said the repurchases were being done as there was no compelling other use for surplus capital, although Barclays said it would continue its "highly progressive" dividend policy.

BZW reported lower profits than in last year's first half, £124 million after £148 million, but was up from the disastrous level of £42 million seen in the second half of 1996.

Costs remained high but steady and revenue was better, though it admitted a £20 million blemish, lost on equity derivatives trading ahead of the British general election in May.

"What encourages me is that we have lifted our performance and we have a useful pipeline of business going forward," said BZW chief executive Mr Bill Harrison.

Mr Taylor said Barclays has seen its margins tighten in nearly every product area but still managed a 30 per cent rise in UK banking profits.

"In personal banking, there is pressure," Mr Taylor said in an interview. "Our margins are squeezed in almost every product except mortgages where they are widening slightly as the market recovers."

Barclays' net interest margin was actually wider, climbing to 3.47 per cent from 3.24 per cent this time last year and 3.42 per cent at the end of 1996.

"The margin is slightly up because we've continued to move the mix of our business towards the higher margin products."

Mr Taylor said new business in mortgages was up 29 per cent, reflecting the bank's increased preparedness to lend, given the better margins in the home finance market.

Barclays said sales of personal loans were particularly buoyant and larger volume had offset tighter margin and Mr Taylor said credit cards had made "reasonable" progress while new business volumes in the mortgage market had risen by 29 per cent.

Provisions for bad debts were sharply lower compared to this time last year, dipping to £90 million sterling from £148 million last year but higher than the £67 million seen at the year-end.