July 30, 2014 / 6:12 AM / 3 years ago

UPDATE 2-Kenya's Equity Bank hopes for record year after strong first half

* Subsidiaries contribute 15 pct to H1 profit

* Customer deposits rise by 15 percent

* Equity to roll out mobile service soon (Adds CEO comment on outlook)

By George Obulutsa

NAIROBI, July 30 (Reuters) - Kenya’s Equity Bank could be on course for a record year after first-half pre-tax profits rose 21 percent due to an expanding loan book and an improved performance from subsidiaries in nearby countries.

Chief Executive Officer James Mwangi told a briefing on Wednesday that loans advanced to customers grew 24 percent to 186.5 billion shillings.

He said net interest income at the bank, which operates in Uganda, Tanzania, Rwanda and South Sudan, rose 6 percent to 14.02 billion shillings.

“I think we will maintain momentum that we have for the first six months. So we are optimistic that this would be the best year so far in the history of Equity Bank,” he told reporters after the briefing.

Mwangi said all the bank’s subsidiaries in nearby countries had broken even and together contributed 15 percent to the pretax profit. This contribution would rise to 25 percent over the next three years.

Mwangi said there was a possibility the bank could raise more funds in the next two years, but did not give details.

“We can see ourselves, may be in two years’ time, coming to the market,” he said.

Equity Bank, which is Kenya’s biggest lender by depositors, said pretax profit rose to 10.82 billion shillings ($123.38 million). The bank’s shares rose 1 percent.

Equity Bank’s deposits grew 15 percent to 216 billion shillings. Its cost-to-income ratio rose to 46 percent from 44.8 percent in first half 2013, but was still lower than the ratio of 48.7 percent for first quarter of this year.

Parshv Shah, investment analyst at Afrika Investment Bank, said Equity’s full-year profits would exceed its 2013 earnings, which were up 9 percent to 19.0 billion shillings in 2013.

“I think the results were quite positive. We do expect positive results for the full year,” he said.

The bank said it would launch its telecoms services arm soon to expand its market share in the fast-growing mobile phone-based financial services market. Equity has teamed up with the country’s second-largest telecoms firm, the local arm of Bharti Airtel, to roll out its new service.

Equity will offer its customers sim cards linked directly to their bank accounts. They will then be able to access their accounts and apply for loans via their mobile phones. Equity plans to expand the service across east African countries where both firms operate if the service catches on in Kenya.

Equity Bank is the first of Kenya’s major banks to report first-half results. KCB Bank Group Kenya’s biggest bank by assets, is due to report its results on Thursday.

$1 = 87.7000 Kenyan Shillings Editing by James Macharia and Jane Merriman

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