The lender, which also operates in Uganda, Tanzania, South Sudan, Democratic Republic of Congo and Rwanda, said interest income grew by 9% to 27.7 billion shillings, while income from commissions -- fees charged on transactions and forex trading --was up 13% to 14.9 billion shillings.

Net loans to customers rose 17% to 320.9 billion shillings, CEO James Mwangi told investors, surpassing the group's target of 10 to 15% expansion.

He attributed the growth to new distribution channels including mobile phone lending apps.

Equity Group's banking business in Kenya, where it is the biggest lender by customers, provides the bulk of profits but subsidiaries outside Kenya are growing in importance.

Regional businesses contributed 18% for the period, unchanged from the first half of last year.

The net interest margin dipped to 8.0% in the first half from 8.2% in the year earlier period, while the bad debt ratio rose slightly to 8.6% from 8.4%, but stayed well below the Kenyan industry average of 12.7%, Equity said.

It said customer deposits jumped to 458.6 billion shillings from 393.69 billion shillings, while total assets rose to 638.7 billion shillings from 542.02 billion shillings.

In April, Equity said it was in talks with London-listed financial services firm Atlas Mara Limited about acquiring stakes in banks in Rwanda, Zambia, Mozambique and Tanzania.

It said it was entering transaction agreements to acquire, via a share swap, 62 percent of the share capital of Rwanda's Banque Populaire du Rwanda and 100 percent of African Banking Corporation of Zambia, African Banking Corporation Tanzania and African Banking Corporation Mozambique.

"We are at the tail end of negotiations. We are still committed," Mwangi said.

($1 = 103.1500 Kenyan shillings)

(Reporting by George Obulutsa; Editing by Duncan Miriri and Kirsten Donovan)