UPDATE 2-Kenya's top banks see more growth after 2012 profit rise
* Equity, KCB and Co-op post double-digit profit growth
* Growing economy, regional trade help to drive growth
* Equity CEO says presidential election main risk factor (Wraps three sets of results)
By Beatrice Gachenge and George Obulutsa
NAIROBI, Feb 28 (Reuters) - Three of Kenya's top banks posted double-digit percentage rises in profit on Thursday, driven by a growing economy and regional trade, and said they would maintain growth by expanding into new markets, investing in technology and cutting costs.
However, one executive cautioned that much could depend on whether next week's hotly-contested presidential election passed calmly, without the bloodshed that followed the 2007 vote.
Lenders in the east African nation of 40 million people have often been sought out by foreign investors because their profit gains have stayed ahead of economic growth in recent years.
The rise in their earnings has been driven by recruitment of new customers into the financial system as well as growing trade in the region amid expanding economic ties in east Africa.
Most of the banks have reported robust earnings for last year despite high lending rates in the first half of the period after the central bank tightened monetary policy aggressively.
Equity Bank said pretax profit rose 36 percent to 17.42 billion shillings ($202 million), after a surge in net interest income, while Co-operative Bank posted a 67 percent jump in profit to just under 10 billion shillings.
Kenya Commercial Bank, which is east Africa's biggest bank by assets and outlets, said pretax earnings climbed 14 percent to 17.2 billion shillings.
Those gains compare with Kenya's economy, which expanded by 4.5 to 5 percent in 2012, according to IMF/World Bank estimates.
Equity's Chief Executive James Mwangi said the bank would roll out new electronic delivery channels such as mobile phone banking and expand its so-called "agent" banking model, which has worked well in Kenya, to its other markets like Tanzania.
Under the model, banks use contracted agents like shops and petrol stations to offer limited banking services, keeping costs down as it eliminates the need for new branches.
"We are confident we will outperform the current (profit) growth rate going forward," Mwangi said, adding the main risk facing the business was a presidential vote next Monday.
Last time the country went to elect a president in 2007, the results were disputed, leading to ethnic violence in which more than 1,200 people were killed and another 350,000 displaced.
Equity is one of the most frequently traded shares at the Nairobi bourse and investors sent the shares 1.8 percent higher to 28.50 shillings apiece. The stock has risen 17 percent so far this year beating the main NSE 20-Share index, which has added 9.2 percent.
"The loans and advances grew exceptionally. We underestimated their loan portfolio," said Eva Njuguna, an analyst at Sterling Investment Bank.
SOUTH SUDAN MARKET
Co-op Bank, which is rooted in the country's vibrant co-operative movement, said it planned to start operations in South Sudan, Africa's youngest nation, in a joint venture with the Juba government, to spur further growth.
"By the end of the year we expect to have about six branches in Juba and that will give us a solid base to be able to expand," Gideon Muriuki, the bank's chief executive officer, told Reuters.
The bank raised its earnings per share to 1.84 shilling from 1.34 shilling, sending its shares as much as 3.7 percent higher to 14 shillings.
KCB, which has operations in Uganda, Tanzania, South Sudan, Rwanda and Burundi, said it would cut costs and increase contributions from the subsidiaries to grow its earnings.
The bank will lower its cost-to-income ratio to 50 percent from 57.4 percent and raise the share of the international business's contribution to at least a quarter from just under 10 percent, its chairman, Musa Ndeto, told investors, without giving a specific timeframe for these targets.
($1 = 86.3000 Kenyan shillings) (Additional reporting and writing by Duncan Miriri; Editing by Edmund Blair and Mark Potter)
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