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National Bank of Kenya Gains on Expansion Bets: Nairobi Mover

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March 28 (Bloomberg) -- National Bank of Kenya Ltd., a state-controlled lender, headed for its biggest gain in two weeks on bets planned expansion and investment in technology will boost profitability.

The shares surged as much as 9.8 percent to 22.50 shillings before trading 7.3 percent higher at 22 shillings by 1:30 p.m. in the capital, Nairobi, the biggest gain on a closing basis since March 12. More than 91,000 shares traded, 1.5 times the three-month daily average.

The lender is planning a rights offer next year to fund its expansion, Managing Director Munir Ahmed said March 25. National Bank plans to open as many as 15 branches 2013 and 10 in 2014. Last year the company opened 10 outlets for a total of 60.

“Growth in the bank’s earnings will be from ongoing branch expansion expected to attract new deposits and grow interest and non-interest income in the medium-term,” Kestrel Capital (East Africa) Ltd. said today in an e-mailed note to clients. “The bank’s high cost base will decline in the medium-term from investments made in upgrading operating IT software in the year.”

Shares in National Bank plunged 10 percent on March 25 after the lender said 2012 net income fell to 729.8 million shillings ($8.5 million) from 1.55 billion shillings a year earlier. Total interest expenses were 3.66 billion shillings from 1.38 billion shillings in 2011.

“National Bank provides a cheaper entry into the banking sector for investors who are banking on correction of earnings,” Ian Gachichio, a research analyst at Kestrel, said in a phone interview.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

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