Kenya's Equity Bank says Q1 profit rises 29 pct

* Pretax 1.16 bln shillings in Q1 2009 VS 0.9 bln in Q1 2008

* Operating expenses jump 69 pct on investments

NAIROBI, May 21 (Reuters) - Kenya's Equity Bank (EQTY.NR) posted a 29 percent jump in pretax profit for the first quarter of this year to 1.16 billion shillings ($14.94 million), up from 0.9 billion a year earlier, its CEO said on Thursday.

Operating expenses leapt 69 percent to 2.2 billion shillings from 1.3 billion shillings in the first three months of 2008 as the bank opened new branches and started new businesses including an investment bank.

"It is a time of planting and weeding before we can harvest," the chief executive told investors.

"While these investments pushed the cost-to-income ratio to 66 percent, it puts the bank in position to generate superior performance in the future."

He said half of Equity's 106 branch network in Kenya had not yet broken even, costing it 200 million shillings a month.

All but 10 of the branches, however, would break even by the fourth quarter of this year, Mwangi said.

He said the east African country's drought and high inflation had hit the bank's customers, the majority of whom are small farmers and traders.

"People who used to do four transactions are now doing two," he said.

Equity, which began life as a small building society in central Kenya, has grown to the upper echelons of the nation's banking sector.

Last year, it invested in Uganda's Microfinance Limited and turned it into a bank. It is now turning its eye towards South Sudan where it is launching a bank soon.

Equity has also started an insurance agency, shares custodial services at the Nairobi bourse and has recruited 10 investment bankers for its Equity Investment Bank.

"We shall continue to grow the bank despite the prevailing global recession and local economic slowdown, and have a very positive outlook for the rest of the year," Mwangi said.

(Reporting by Duncan Miriri; editing by David Clarke and Elaine Hardcastle)