UPDATE 1-AlWatany Bank's H1 profit at record on loan growth

(Adds quotes from chief operating officer, more details)

CAIRO, Aug 7 (Reuters) - AlWatany Bank (WATA.CA), Egypt's third largest lender by market value, posted a record first half profit on Thursday as loans surged, and said it could sustain the pace of growth as it introduces new products.

AlWatany, bought by National Bank of Kuwait (NBKK.KW) last year, said it made net profit of 201.8 million Egyptian pounds ($38 million) in the first half, up 37.6 percent from the same period last year.

"We will be able to continue this level of earnings, especially as we are planning to introduce new products in the coming two quarters," AlWatany's chief operating officer Ashraf el-Kady told Reuters, declining to give further details.

The bank did not immediately release a detailed financial statement.

NBK, Kuwait's largest bank by assets, bought 51 percent of AlWatany Bank for $522 million last August and as of April owned 98 percent of the bank's shares.

"NBK's strength is the retail side," Kady said. "We are working with the senior management at NBK to enhance our products and provide new tailored products to the Egyptian market."

Kady said NBK products in retail loans and in mortgage finance helped drive a 33 percent increase in loans for AlWatany in the first half.

"We introduced some of the NBK products to retail and mortgage finance which had a very good reception in Egypt," he said. "We also focused on our unique strength in providing Islamic products for our customers."

Banks in Egypt are expanding retail lending as the economy of the most populous Arab country grows at its fastest pace in decades.

AlWatany said in April it planned to double the number of its branches over the next two years to tap growth in the local market.

Around 70 percent of Egyptians do not have bank accounts, Barclays Bank has estimated. Credit Agricole Egypt (CIEB.CA) has said the number of Egyptians who have bank accounts could grow by 25 percent per year.

Egypt's economy grew at an annualised rate of 7.5 percent in the January-March quarter of 2008.

($1=5.30 Egyptian pounds) (Writing by Will Rasmussen; Editing by Rosalba O'Brien)