Barclays says big investment bank deal unlikely

LONDON (Reuters) - Barclays is unlikely to make a big investment banking acquisition, the head of Barclays Capital said, following speculation it could pursue Lehman Brothers or other hard-hit firms.

Asked whether Barclays would consider a move for Lehman or another investment bank, BarCap Chief Executive Bob Diamond told Reuters: "We always look at every opportunity that's out there but it's unlikely you would see us in that space. We lead first with the organic."

Diamond said there were good opportunities for BarCap to take market share during difficult market conditions, especially in the United States.

"We recognise how difficult the conditions are out there and the need to be cautious and to balance risk and reward, but we're not without focus on opportunities," he said. "The firms with the best franchises and business models can potentially see a pickup in business."

He said challenging market conditions are likely to remain this year and through 2009.

"We don't think this will spill into a deep, dark recession but we do think it's a cyclical event with a weaker, slower economy around the world," he said, suggesting the duration of the downturn will be unclear until the bottom of a U.S. housing market slump has been reached.

Barclays earlier reported a 33 percent drop in first-half profits after taking a 2 billion pound writedown on the value of risky assets, but the profit drop was not as steep as expected.

(Reporting by Steve Slater)