KENYA'S KCB WARNS ON BAD DEBTS, PUTS OFF CASH CALL

Customers at a KCB banking hall. If the rights issue had progressed as planned, it would have caused a small dilution to investors who fail to pump in their share of new capital into the bank.

* South Sudan business affected by renewed violence

* Bad debts jump 36 pct in six months period

* Shares down 28 percent this year (Adds non-performing loans, share price performance)

NAIROBI, Aug 4 (Reuters) - KCB Group, Kenya's largest bank by assets, warned on Thursday of rising bad debts in the industry and postponed plans to raise cash through a rights issue.

The group, which also operates in Rwanda, Burundi, Tanzania, Uganda and South Sudan, also reported pretax profit rose 14 percent in the first half of this year to 15.1 billion shillings ($149.09 million), as earning from Kenya surged 19 percent.

Its non-performing loans, however, jumped by over a third, sending the ratio of bad debts to 8.9 percent from 7.3 percent a year earlier.

The lender blamed three major loan accounts in the construction and government supplies services sectors for the jump, pledging to reverse the trend through recoveries.

"Generally, across the industry, the level of NPLs remain a concern," KCB Chief Executive Joshua Oigara said in a statement.

KCB's shares are down 28 percent this year at 31.75 shillings, underperforming the benchmark NSE-20 share index, which is down 13.88 percent this year.

KCB put off a rights issue planned for later this year to raise 10 billion shillings, citing a strong projected cash flow for the full year. It did not give a new time frame.

Daniel Kuyoh, a senior investment analyst at Alpha Africa Asset Managers, said the level of bad debts at KCB were generally in line with expectations, after the central bank tightened rules around classification of bad loans for commercial banks.

"The central bank is very heavy on enforcing the guidelines," Kuyoh said, adding lack of revenue growth among some major Kenyan firms, which took out bank loans, could also be driving bad loans.

Patrick Njoroge, the governor of the central bank, said in April that bad debts for Kenyan banks stood at 8 percent, well above the 5.7 percent level in April 2015.

Njoroge, who took over in June last year, has been driving efforts to tighten bank supervision, after three medium- and small-sized lenders collapsed in the nine months to April, sparking concerns about the stability of the sector.

KCB said net interest income rose 16 percent to 22.53 billion shillings in the first half, while net loans and advances went up 8 percent.

Its earnings per share rose to 6.94 shillings from 6.11 shillings. Its shares were up 1.6 percent to trade at 32.00 shillings on the Nairobi Securities Exchange at 0749 GMT, before giving up some of the gains to trade at 31.75 shillings later. ($1 = 101.3000 Kenyan shillings)

Reuters