UPDATE 2-Kenya Commercial Bank aims to grow subsidiaries' profit

Thu Aug 29, 2013 7:33am EDT

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* Aims to consolidate growth of existing subsidiaries

* Pretax profit up 19 pct in first half 2013 (Adds outlook, details, analyst)

By George Obulutsa

NAIROBI, Aug 29 (Reuters) - Kenya Commercial Bank (KCB) said it would focus on increasing the contribution of existing East African regional subsidiaries this year to reach 15 percent of pretax profits before it expands into other countries.

Kenya's largest bank, measured by assets, also operates in Tanzania, Rwanda, Uganda, South Sudan and Burundi.

KCB's network of regional branches contributed 11 percent of pretax profit in the first six months of 2013, up from 7.4 percent in the first half of 2012. Its Kenyan operations accounted for the rest.

"In the short term, which is this year, what we are going to do is to make sure that they contribute a bigger share of profits," Chief Executive Joshua Oigara told reporters after an investor briefing.

"Fifteen percent is a good target in the short term, 25 percent in the mid term."

KCB on Thursday posted a 19 percent rise in first-half pretax profit to 10.1 billion shillings ($115.3 million).

The bank said it was looking to technology such as Internet banking, mobile banking and the use of a uniform banking platform across all its branches to support growth in profits.

In the first six months, KCB's interest income rose 12 percent to 16.05 billion shillings.

Its net loans and advances rose to 214.09 billion shillings from 202.07 billion in the first half of 2012, while its basic and diluted earnings per share rose to 4.82 shillings from 4.10 shillings.

Earlier this year, Oigara said that KCB planned in 2014 to expand into markets including the Democratic Republic of Congo and Ethiopia.

KCB Chairman Ngeny Biwott said that once the performance of existing subsidiaries was consolidated, the Kenyan bank would also look to Somalia and Djibouti.

"Going forward as a board, instead of looking at East Africa, we want to look at eastern Africa. All these are within our radar if and when the situation gives us a kind of comfort that we can the go to those areas," Biwott said.

Kenyan lenders, such as Equity, Co-operative Bank , NIC Bank and Diamond Trust Bank, have expanded aggressively into the region in the past decade.

At 1105 GMT, KCB shares were down 1.2 percent at 42.50 shillings.

KCB's share price was still up around 43 percent for the year to date, and analysts said they expected it to rise further. ($1 = 87.6000 Kenyan shillings) (Editing by Kevin Mwanza and Jane Baird)

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