* Sees higher demand for credit in fourth quarter
* Attributes it to falling lending rates
* Nine months pretax profit jumps nearly 30 pct (Adds details, analyst comments)
By Beatrice Gachenge
NAIROBI, Nov 6 (Reuters) - Kenya's Equity Bank, the country's largest bank by customers, on Tuesday said it expects a strong end to 2012 on the back of falling lending rates and a favourable economy that could spur borrowing.
The central bank has cut its policy rate by 500 basis points to 13 percent over two meetings since July, allowing commercial banks to cut lending rates to about 19 percent from about 25 percent in the first half of the year.
"The fourth quarter promises to be much better on account of reduced interest rates, reduced inflation and stability in the exchange rate," said James Mwangi, Chief Executive of Equity.
More than half of all the bank accounts in the country are in Equity Bank, whose business model is based on attracting the low income earners, who make up a majority of the population.
Equity said its pretax profit for the first nine months of this year jumped nearly 30 percent to 11.79 billion shillings ($138 million), lifted by its net interest income.
"Net interest income growth was predominately driven by the year-on-year increase in customer loans and expanding margins," said Mwangi.
Interest income on loans and advances rose by 81 percent to 11.19 billion shillings, while the loan book grew by 20 percent to 109.37 billion shillings. Total assets stood at 232.22 billion shillings, up from 195.38 billion shillings previously.
Equity also operates in neighbouring South Sudan, Tanzania, Uganda and Rwanda.
Kenyan lenders have reported strong growth in profits this year, despite facing a high interest environment in the first-half. Analysts welcomed Equity's results for the nine months.
"They are yielding way higher in loans than they were last year," said Francis Mwangi an analyst at Standard Investment Bank.
At 0946 GMT, its share price rose 1.03 percent to 24.50 shillings. The shares are some of the most frequently traded on the Nairobi Securities Exchange. ($1=85.5750 Kenyan shillings) (Editing by Duncan Miriri and Mike Nesbit)