Barclays and HSBC each post £3 billion profits

HSBC said profits were $5 billion (£2.98), down 51% on a year ago but much better than the second half of 2008.

Barclays also made £2.98 billion, after its investment banking arm Barclays Capital saw profit rise 100%.

Its profit was up 8% on the £2.75 billion it made in the first six months of 2008, although its High Street banking operations saw profits fall to £268 million, less than half the amount Barclays made in the same period a year ago.

The bank - which turned down Government bail out cash in favour of its own fundraising moves- had to pay out £4.6 billion in bad debt charges in the first half of the year, due to credit write-downs and the deteriorating economic climate. It said it expects the rest of 2009 to be "challenging".

Barclays confirmed it would not pay out an interim dividend to shareholders but said it expects to resume paying out a divi to investors before the end of the year.

Ralph Silva, banking analyst at Tower Group, said that refusing Government hand-outs pushed Barclays Capital ahead of its rivals.

He said: "Investment banking is back. If you are a big company you are going to gravitate towards the banks that have not received government funds."

Staff costs increased 36% to £4.8 billion and the bank said this was driven by a 32% rise in salaries and incentive payments, primarily in Barclays Capital. Barclays said this reflects the inclusion of the acquired Lehman Brothers' North American businesses.

The news comes after reports that executives at the division are in line for pay and bonuses worth an average £250,000 for six months' work.

Remuneration is a thorny issue for banks after the Government bail-outs of last year and, although Barclays did not receive state aid, its policies will be scrutinised for signs of a return to the old days of high risk and big rewards.

Barclays Capital salvaged the investment banking business from the wreckage of failed Lehman Brothers and said its strong performance reflects the benefits of the acquisition.

Barclays chief executive John Varley said: "Our strategy has helped us weather the crisis and we want our employees, customers and shareholders alike to continue to benefit from it over time."

He expressed confidence that Barclays would remain profitable for the rest of the year.

"The trends that lie behind our operating performance in the first half of this year were again observable in July.

"We are realistic about just how difficult the environment is, and will remain, but we are committed to delivering another year of solid profitability through our continued emphasis on serving our customers and clients."

In the midst of the financial crisis, Barclays turned to Middle East investors for funding, and also agreed the £8.2 billion sale of its Barclays Global Investors fund management division.

Barclays' shares fell to lows below 50p in the dark days of January, but have recovered to trade around 300p as fears of state intervention passed.

Varley said the group would not be making a decision about the level of bonuses for staff until later this year.

He told the BBC Radio 4 Today programme: "The subject of compensation is a hot topic and I understand that, and it is very important that we are sensitive to the views of citizens and indeed central bankers like Mervyn King on this subject.

"We do not make bonus payments at this point of the year. The year is not over - there are five months to go. We will make our decisions about variable compensation at the end of the year.

"When we do so, we will take guidance from the Financial Services Authority... we will take guidance from the Walker review on governance... so we are sensitised to this issue and we will behave responsibly."