Barclays saw profits jump in the six months to the end of June as its trading arm cashed in on market turmoil. 

This prompted it to boost its bonus pot for executives for the first half of the year by almost 30 per cent, from £1billion to £1.3billion.

The bank's revenue rose 11 per cent to £16.5billion in the period, while its pre-tax profit increased by 17.3 per cent to £6.1billion. 

Income in the bank's equity trading division soared to £1.26billion, a rise of 45 per cent compared with the same period last year as traders took advantage of market volatility caused by the war in the Middle East.

Frenetic trading in artificial intelligence stocks also played a role.

Its investment banking arm posted revenue growth of 11 per cent to £7.99billion, including a 20 per cent rise in profits in the second quarter alone. 

The investment banking arm accounts for 48 per cent of group revenues, while high street banking arm Barclays UK accounts for 27 per cent and Barclays' US consumer bank comprises 13 per cent of revenue.

The bank also benefited from higher interest rates, as the conflict in the Middle East and resulting rise in oil prices drove up the cost of mortgages for households. 

Barclays UK saw revenue growth of 8 per cent to £4.52billion and a rise of 10 per cent in pre-tax profit to £1.77billion. 

Net interest income, the difference between the interest a bank earns on loans and mortgages and what it pays out to customers on their savings, rose by 8 per cent to £3.99billion.

Gross mortgage lending in the bank's UK arm rose to £17.7billion in the period, up from £15.4billion a year ago.

Barclays’ private bank and wealth arm secured a five per cent increase in income to £713million, reflecting growth in the funds held by its wealthy clients.

The business announced a dividend of 5.9p per share, up from 3p a share a year ago. It also unveiled plans to launch a new £1billion share buyback.

The boss of Barclays has rejected calls for a windfall tax on banks despite posting bumper profits and increased its bonus pool for the biggest risk-takers. 

Demands for an extra levy on lenders have been growing since new Prime Minister Andy Burnham unveiled plans to spend more on defence, social care and cost-of-living support.

The biggest banks, including Barclays, already pay a 3 per cent surcharge above the 25 per cent UK corporation tax rate.

But Barclays chief executive C.S. Venkatakrishnan warned against an extra levy, telling reporters that ‘for every £1 of capital we have we lend £8 to £10’ to businesses and households that supports economic growth.

‘The better the country grows the better we all are,’ he added.

Barclays has increased the bonus pool for its investment banking arm by £200million after the cap on payouts imposed after the 2008 financial crisis was lifted.

However, more of that pay will vary depending on performance, Venkat said.

Barclays said it was on track to lend £30billion into the UK economy this year, after growing loans by 5 per cent in the first half.

Banks’ profits have been boosted in recent years because of higher-for-longer interest rates, which have widened the gap between what they pay savers on deposits and charge borrowers for lending.

Restoring the bank surcharge, which was cut in 2023, to 8 per cent would raise around £9billion over the next four years, according to the Trades Union Congress.

‘Big banks like Barclays are raking it in while working people and local businesses are struggling,’ said its general secretary Paul Nowak.

‘High interest rates have been a boon for banks but have meant mortgage misery and higher bills for the rest of us,’ he added.

‘Andy Burnham has rightly pledged to prioritise tackling the cost-of-living crisis…households will need more support in the months ahead. ‘This is not a ‘hard choice’, ‘ he added.

Barclays’ shares fell by almost 6 per cent in early trading on disappointment that income from outside its investment banking unit was less than expected.

Venkat said the bank was upgrading its group income target for 2026 by around £500million to £31.5billion. 

Under Venkatakrishnan, Barclays has been trying to move away from its investment bank and towards its UK business with a focus on retail and corporate customers. 

The bank's results received a muted response from some analysts who said that the group's UK divisions had fallen short of expectations on net interest income, with greater pressure on deposit margins as banks compete for customer deposits by offering higher interest rates. 

Chris Beauchamp, chief market analyst at IG, said: 'With the share price sitting at post financial crisis highs there is little room for error for Barclays, but these results provide the reassurance that the group is well-placed for the rest of the year.'

Richard Hunter, head of markets at Interactive Investor, said: 'The raising of the group projected income for the year to around £31.5billion from £31billion is perhaps typically conservative and brings a tinge of disappointment, but if the second quarter momentum is maintained expectations will continue to ratchet higher as the group delivers by firing on all cylinders. 

'These heightened expectations, let alone a spike of 24 per cent in the share price in the last three months leading up to these results, probably explain the relatively cold reaction in opening exchanges.'

Barclays is the first major high street lender to report half-year results, with Lloyds and NatWest due later this week.