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* H1 pretax profit up 12 pct to 6.1 bln shillings
* Withholds dividend to expand capital base, invest
* Loan book grows 20 pct (Adds detail on real estate loan plans)
NAIROBI, Aug 12 (Reuters) - Barclays Bank of Kenya plans to start a mortgage finance division to tap demand forhousing that far outstrips supply in the east African country.
The announcement came as Barclays reported a 12 percent jumpin first-half pretax profit on Tuesday, largely due to a surgein customer loans and net interest income.
It launched an investment banking division in the first halfof the year and was lead arranger in Kenya's first sovereignbond issue worth $2 billion in June. It hopes to capitalise onthis to raise funds from international debt markets.
The investment banking arm "will allow us to diversify intotransactional services such as debt and equity capital marketsas well as mergers and acquisitions," Barclays Kenya's managingdirector Jeremy Awori said in a statement.
The bank said it would not pay an interim dividend to enableit to meet new capital requirements set by the Central Bank ofKenya and raise capital for investment. It paid an interimdividend of 0.20 shilling per share in the year-ago period.
Shares in Barclays Kenya were unmoved at 17.05 shillings,with traders saying the lack of an interim dividend haddisappointed and subdued interest in the stock.
The bank, controlled by Barclays Plc said profitwas 6.1 billion shillings ($69.36 million), with the loan bookgrowing by 20 percent to 128 billion shillings.
Awori said he expected interest rates to ease, which wouldbuoy lending, and the bank was keen to expand its mortgageportfolio, with annual demand for housing in Kenya outstrippingsupply by about 100,000 units.
Kenya's government says the Eurobond will cut thegovernment's local borrowing requirement and help reduceinterest rates.
Barclays Kenya's profit lagged its rivals Equity Bank, the country's biggest by deposits, and KCB,the largest by assets. KCB also has a dedicated mortgage unitand plans to raise funds from international debt markets forlending to the real estate sector.
"Overall the results were solid, and we forecast even betterresults for the full year," said Joy D'Souza, a research analystat Kestreal Capital. "Barclays has in the past been risk-averseand shy in lending and has lagged its peers."
Barclays said its net interest income grew by 5 percent to9.7 billion shillings, while non-interest income fell by 5percent mainly due to a decline in foreign exchange income in astable currency market.
Non-performing loans fell 5 percent to 4.2 billionshillings. (Reporting by James Macharia; editing by Tom Pfeiffer)
