* H1 pretax profit up 12 pct to 6.1 bln shillings
* Withholds dividend to expand capital base, invest
* Loan book grows 20 pct (Adds detail on real estate loan plans)
NAIROBI, Aug 12 (Reuters) - Barclays Bank of Kenya plans to start a mortgage finance division to tap demand for housing that far outstrips supply in the east African country.
The announcement came as Barclays reported a 12 percent jump in first-half pretax profit on Tuesday, largely due to a surge in customer loans and net interest income.
It launched an investment banking division in the first half of the year and was lead arranger in Kenya's first sovereign bond issue worth $2 billion in June. It hopes to capitalise on this to raise funds from international debt markets.
The investment banking arm "will allow us to diversify into transactional services such as debt and equity capital markets as well as mergers and acquisitions," Barclays Kenya's managing director Jeremy Awori said in a statement.
The bank said it would not pay an interim dividend to enable it to meet new capital requirements set by the Central Bank of Kenya and raise capital for investment. It paid an interim dividend of 0.20 shilling per share in the year-ago period.
Shares in Barclays Kenya were unmoved at 17.05 shillings, with traders saying the lack of an interim dividend had disappointed and subdued interest in the stock.
The bank, controlled by Barclays Plc said profit was 6.1 billion shillings ($69.36 million), with the loan book growing by 20 percent to 128 billion shillings.
Awori said he expected interest rates to ease, which would buoy lending, and the bank was keen to expand its mortgage portfolio, with annual demand for housing in Kenya outstripping supply by about 100,000 units.
Kenya's government says the Eurobond will cut the government's local borrowing requirement and help reduce interest rates.
Barclays Kenya's profit lagged its rivals Equity Bank , the country's biggest by deposits, and KCB, the largest by assets. KCB also has a dedicated mortgage unit and plans to raise funds from international debt markets for lending to the real estate sector.
"Overall the results were solid, and we forecast even better results for the full year," said Joy D'Souza, a research analyst at Kestreal Capital. "Barclays has in the past been risk-averse and shy in lending and has lagged its peers."
Barclays said its net interest income grew by 5 percent to 9.7 billion shillings, while non-interest income fell by 5 percent mainly due to a decline in foreign exchange income in a stable currency market.
Non-performing loans fell 5 percent to 4.2 billion shillings. (Reporting by James Macharia; editing by Tom Pfeiffer)