Matt Barrett, chief executive of Barclays, said there was no need for concern on the levels of consumer borrowing in the UK, as the bank reported that spending on its credit cards had continued to rise.
Operating profits at Barclaycard for the first six months of the year were up 22 per cent as it attracted 651,000 new customers. The total average balance on its credit cards grew 16 per cent to £7.2bn.
The growth in profits at Barclaycard helped to lift profits across the group by 12 per cent for the first half of the year. The figures beat most market expectations and shares in Barclays closed up nearly 10 per cent at 477p.
"There is no doubt at all that there has been a steep increase in household debt. This has been fuelled by low interest rates and low unemployment," Mr Barrett said yesterday. "The good news is that the debt servicing capability is also very strong. I'm fairly relaxed about the resilience of households, were interest rates to move up. If they do start to move up, they will only do so gradually, and consumers would adjust their saving and spending habits accordingly. Although there are a lot of legitimate concerns about borrowing levels, I'm not too nervous about the ability of consumers to service their debts."
He did warn that many rival banks had taken on too much risk with aggressive mortgage lending tactics. Many lenders have experienced a boom in lending as the housing market has grown, but Barclays' share of new mortgage lending in the UK fell in the first half to 3 per cent from 11 per cent this time last year.
"There are rivals in the market who are doing some interesting pricing and whose risk appetite is greater than ours," Mr Barrett said. "We will not chase volume and will not make any irrational moves to get our numbers up. We think a number of others have been acting irrationally in the short term."
Operating profits across the bank, which made 1,700 job cuts in the first half of the year, were up 11 per cent to £2.2bn while pre-tax profits were up 12 per cent to £1.7bn. Mr Barrett, who stonewalled questions about management succession, was also able to tell investors that provisions for bad debts at the bank had fallen by 9 per cent to £652m. Provisions in its Barclaycard division were increased by 13 per cent, but the company said this was in line with the growth in the business.
The group witnessed a 12 per cent growth in operating profits in its personal financial services division, as sales of general insurance, personal loans and current accounts improved. The company now has 2.4 million customers of its Openplan account, which offsets a customer's borrowings against their savings.
Its fund management arm, Barclays Global Investors, has also enjoyed a healthy turnaround as investment markets improved. Operating profits rose 52 per cent in the first six months of the year. Barclays Capital, its investment banking arm, has issued more than $100bn of debt for clients in the past six months.
Mr Barrett also said the group's business banking division had held up well to the onslaught of price controls in the sector. The top four UK banks were ordered to improve their service to businesses after the Competition Commission described them as operating a 'complex monopoly.'
The one troublesome spot for the company was its private client business, which saw a fall off in profitability of 28 per cent as investors shun volatile equity markets. Income from fees and commission fell 26 per cent.
"We are very pleased that Barclays is delivering on all fronts. The figures today showed good broad-brush performance - costs under control and provisions down. We are expecting more good growth from them going forward," John-Paul Crutchely, an analyst at Merrill Lynch, said yesterday.
Some analysts yesterday, however, were concerned that while the bank was making good returns, it is reaching the limits of its growth potential.