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* New chairman says to speed up asset sales, cost cuts
* To cut assets to 20 bln stg by end-2017 vs 57 bln now
* Keeps dividend flat for 2015, rules out capital raising
* Shares hit 18-month high, up 2 pct (Writes through with comments from chairman, updates shares)
By Steve Slater and Matt Scuffham
LONDON, July 29 (Reuters) - Barclays' new chairmansought to stamp his mark on the bank on Wednesday byaccelerating the sale of assets and cost cutting after the groupproduced a 12 percent increase in second-quarter profits.
Chairman John McFarlane, who arrived at Barclays in Aprilwith a reputation for taking bold action, laid out his plans forthe bank after ousting Chief Executive Antony Jenkins earlierthis month. He said the pace of change needed to accelerate.
"Barclays ... remains far too hierarchical, bureaucratic andgroup-centric," McFarlane said. "I therefore want to see muchmore streamlined processes."
McFarlane said the search for a new CEO was underway butheadhunters had not yet presented a list of potentialcandidates. He suggested the new person could come fromoverseas.
"There's probably more fertile ground internationally thandomestically from the early sights we've had," he said.
He pinpointed a need to speed up growth in earnings, returnon equity and capital generation and pledged to lift dividendsin the future, despite putting payouts on hold.
Barclays said its 2015 dividend would stay at 6.5 pence pershare so it can build capital. That generates a yield of about2.6 percent and McFarlane said he wanted that to rise to 4percent or more.
He said as earnings growth would be modest going forward,the bank needed to pay a healthy dividend to deliver anattractive total shareholder return, and 40-60 percent ofearnings should be paid out.
Barclays' core capital rose to 11.1 percent at the end ofJune from 10.3 percent at the end of 2014. The bank said it hadno plans to raise any capital externally, which some analystssaid 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 theinvestment bank and credit cards in the second quarter. Thisoutweighed the impact of a new 850 million pound charge tocompensate UK customers.
COSTS NEED CUTTING
McFarlane said he planned to cut costs as a percentage ofincome to about 55 percent, from 70 percent in the first-half ofthe year, which is expected to involve cuts to staff numbers andbranches.
The bank said it closed 98 branches in Britain in the yearto the end of June, or 6 percent of its network. It also closed35 in Africa.
It is in the middle of a three-year plan to cut 19,000 jobsby the end of 2016, including 7,000 in the investment bank.
The investment bank's return on equity, a profitabilitymeasure, improved to 10.2 percent in the first six months ofthis year, from 5.7 percent a year ago. The bank said thisreflected changes made to reshape it in the past year. McFarlanesaid the division's strategy had been refined, but there was nobig 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 moreinvestment in those areas, but we'll look to scale back theareas that don't make it."
That will mean a focus on its major markets of the UnitedStates and Britain. Analysts expect more cuts in tradingactivities to allow capital to be diverted to higher-returningadvisory and underwriting activities.
McFarlane also said he planned to cut assets that Barclaysno longer wants to 20 billion pounds by the end of 2017. It had57 billion pounds of these "non-core" assets at the end of Juneand had previously planned to cut that number to 45 billion bythe end of 2016.
But cutting non-core assets, such as derivatives contracts,can hit revenues or capital, so analysts said he needed to judgethe pace of sales.
Barclays set aside another 850 million pounds ($1.33billion) to compensate UK customers, including 600 millionpounds 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 lenderhad not disclosed commission on a PPI sale, could result in morematerial compensation costs.
Barclays reported an adjusted pretax profit of 1.85 billionpounds for the second quarter, up 12 percent from a year ago andahead 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.($1 = 0.6403 pounds) (Editing by Jane Merriman)
