March 1, 2012 / 12:26 PM / 6 years ago

UPDATE 2-Kenya's KCB profit surges as expansion pays off

* 2011 FY profit up 54 pct to 15.1 bln shillings

* Boosted by strong performance at foreign units

* Total income up 25 pct

* Total dividend 1.85 shillings vs 1.25 shillings in 2010 (Adds more CEO quotes, analyst, detail, background)

By Beatrice Gachenge

NAIROBI, March 1 (Reuters) - Kenya Commercial Bank , the country’s largest bank by assets, said its full-year profit jumped 54 percent, boosted by a rise in fees and commissions and a strong performance at its branches elsewhere in east Africa.

The bank, which has operations in Tanzania, Rwanda, Uganda and South Sudan, said on Thursday all its regional subsidiaries turned a profit, and it would expand further by launching a new unit in Burundi next month, which would break even in two years.

The bank forecast good results this year after navigating what it said was a difficult 2011 marred by steep inflation, a plunge by the local currency and the financial crisis in Europe.

“We will weather the storm in 2012 and deliver good results,” Chief Executive Martin Oduor-Otieno told an investor briefing.

Pretax profit for 2011 surged to 15.1 billion shillings ($181.7 million), the bank said in a statement.

“They survived last year, which was probably the most difficult for any bank ... They have shown they have resilience. I think this year will be better,” Aly Khan Satchu, an independent analyst said.

“I am more interested to see them get into eastern Congo ... and Rwanda and Burundi puts them on that border,” Satchu said, adding the bank could benefit from the rising cross border trade between that country and the east African community.

Oduor-Otieno said he was concerned over double digit inflation, at 16.7 percent in February, high interest rates, with the benchmark lending rate at 18 percent, and the impact of a general election which must be held by March 2013.

The bank also attributed its profit growth to a two-year-old internal restructuring drive to cut costs and improve service.

Oduor-Otieno said a debate on capping lending rates in east Africa’s biggest economy required wider consultation.

“Everybody is feeling the pinch, but the solution, in our view, requires a much broader discussion and engagement beyond what is proposed,” he said.

Aggressive monetary tightening to curb inflation and prop up the local currency has seen banks raise lending rates to about 25 percent from 15 percent since October, and lawmakers are pushing a new law to cap the rates.

KCB said total income rose 25 percent to 37 billion shillings, against total operating expenses that rose 16 percent to 24 billion shillings.

The bank said earnings per share reached 3.72 shillings from 2.76 previously, and that it would pay a total dividend of 1.85 shillings, up from 1.25 shillings in the previous year.

Its shares were unchanged from their previous day’s close of 20.50 shillings, after climbing in recent weeks.

The share price rallied 8 percent in February as investors scrambled to buy ahead of the full-year results, following rosy earnings in the sector.

“We are likely to see KCB shares rally in tomorrow’s (Friday‘s) session,” said Mwenda Rarama, an analysts at Kingdom Securities.

$1 = 83.1000 Kenyan shillings Editing by James Macharia and Mark Potter

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