Chairman John McFarlane, who arrived at Barclays in April with a reputation for taking bold action, laid out his plans for the bank after ousting Chief Executive Antony Jenkins earlier this month. He said the pace of change needed to accelerate.

"Barclays ... remains far too hierarchical, bureaucratic and group-centric," McFarlane said. "I therefore want to see much more streamlined processes."

McFarlane said the search for a new CEO was underway but headhunters had not yet presented a list of potential candidates. He suggested the new person could come from overseas.

"There's probably more fertile ground internationally than domestically from the early sights we've had," he said.

He pinpointed a need to speed up growth in earnings, return on equity and capital generation and pledged to lift dividends in the future, despite putting payouts on hold.

Barclays said its 2015 dividend would stay at 6.5 pence per share so it can build capital. That generates a yield of about 2.6 percent and McFarlane said he wanted that to rise to 4 percent or more.

He said as earnings growth would be modest going forward, the bank needed to pay a healthy dividend to deliver an attractive total shareholder return, and 40-60 percent of earnings should be paid out.

Barclays' core capital rose to 11.1 percent at the end of June from 10.3 percent at the end of 2014. The bank said it had no plans to raise any capital externally, which some analysts said it should do.

Its shares were up 1.8 percent to 284.5 pence by 1415 GMT, after hitting 288.7p, their highest level since January 2014.

Analysts attributed the rise to its capital generation, lower losses from bad loans and a solid performance by the investment bank and credit cards in the second quarter. This outweighed the impact of a new 850 million pound charge to compensate UK customers.

COSTS NEED CUTTING

McFarlane said he planned to cut costs as a percentage of income to about 55 percent, from 70 percent in the first-half of the year, which is expected to involve cuts to staff numbers and branches.

The bank said it closed 98 branches in Britain in the year to the end of June, or 6 percent of its network. It also closed 35 in Africa.

It is in the middle of a three-year plan to cut 19,000 jobs by the end of 2016, including 7,000 in the investment bank.

The investment bank's return on equity, a profitability measure, improved to 10.2 percent in the first six months of this year, from 5.7 percent a year ago. The bank said this reflected changes made to reshape it in the past year. McFarlane said the division's strategy had been refined, but there was no big shift.

"We expect to be in investment banking and in it strongly," he said. "We will focus on what we're good at and put more investment in those areas, but we'll look to scale back the areas that don't make it."

That will mean a focus on its major markets of the United States and Britain. Analysts expect more cuts in trading activities to allow capital to be diverted to higher-returning advisory and underwriting activities.

McFarlane also said he planned to cut assets that Barclays no longer wants to 20 billion pounds by the end of 2017. It had 57 billion pounds of these "non-core" assets at the end of June and had previously planned to cut that number to 45 billion by the end of 2016.

But cutting non-core assets, such as derivatives contracts, can hit revenues or capital, so analysts said he needed to judge the pace of sales.

Barclays set aside another 850 million pounds ($1.33 billion) to compensate UK customers, including 600 million pounds for mis-sold payment protection insurance (PPI) products, which has now cost the bank 6 billion pounds.

It also said a court ruling last year, which found a lender had not disclosed commission on a PPI sale, could result in more material compensation costs.

Barclays reported an adjusted pretax profit of 1.85 billion pounds for the second quarter, up 12 percent from a year ago and ahead of the average analyst forecast of 1.75 billion pounds. Profits were helped by a 496 million pound gain based on a U.S. court ruling related to former Lehman Brothers assets.

(Editing by Jane Merriman)

By Steve Slater and Matt Scuffham