UPDATE 2-Kenya's Co-op Bank to enter South Sudan, Q1 profit up
* To start operating in South Sudan this year
* Awaits shareholder approval for stockbrokerage business
(Adds details)
NAIROBI, May 27 (Reuters) - Kenya's Co-operative Bank (COOP.NR) will start operations in South Sudan this year, its chief executive said on Wednesday after reporting 29 percent profit growth in the first quarter of 2009.
Ranked Kenya's No. 5 bank in terms of assets, Co-op's pretax profit came in at 1.04 billion shillings ($13.3 million) for the first quarter compared with 805 million shillings a year ago.
"We are negotiating with the government of South Sudan on a joint venture," Gideon Muriuki told reporters. "Possibly, we will have a Co-operative Bank of South Sudan, 70 percent owned by Co-operative Bank, 30 percent owned by the government of South Sudan."
Kenyan firms, from manufacturers to banks, have been jostling for a slice of the South Sudan market since a peace deal four years ago ended a long conflict with the north.
Kenya Commercial Bank (KCB.NR) and Equity Bank (EQTY.NR) already operate in the oil producing but undeveloped region.
The company is also seeking a foothold in neighbouring Uganda and may adopt a similar approach there, Muriuki said.
He attributed the increase in profit to 43 percent growth in the loan book to 55.5 billion shillings from a year ago. Deposits were up 33 percent to 71.9 billion.
Co-op's shares rose 5.74 percent to 6.60 shillings, after touching a session high of 8.50 shillings.
"The PE (price to earnings ratio) is the lowest in the banking sector at 7.5 and first quarter earnings confirm a robust growth curve," an independent market analyst said.
In addition to the regional expansion, Co-op is expanding its branch network in Kenya, east Africa's biggest economy, and launching new businesses.
It has opened seven new branches in Kenya and installed an information communication platform that links its cash points with those of co-operative societies across the country.
Listed in December, Co-op is anchored in the east African nation's vibrant co-operative movement. About two thirds of its shares are held by a holding company owned by co-operatives.
Co-op bought Bob Mathews Stock Brokers this year and rebranded it Kingdom Securities. The acquisition has received regulatory approval and will be put before shareholders for approval at its annual general meeting on Friday.
Co-op's expansion was partly funded with funds raised from the sale of shares during its flotation. The chief executive said it would be able to finance the expansion without seeking more funds from the market.
"I don't see us going to the stock market shortly to raise capital. Not in the next five years, possibly," he said.
Co-op's total assets increased to 89.7 billion up from 68.3 billion in the same period of 2008. Interest income rose by 24 percent while operating expenses climbed 18 percent.
"This (profit) growth is a reflection that the bank has successfully sustained its aggressive growth strategies despite the challenging economic circumstances," Muriuki said. (Editing by Andrew Callus) ($1=78.00 Kenyan shillings)
