UPDATE 1-Kuwaiti lender KFH eyes 20 pct capital hike

* KFH to hike capital by 20 pct - statement

* Price of new shares to be determined at later date

* Approval needed from current shareholders, regulator

(Adds background)

KUWAIT, Nov 27 (Reuters) - Kuwait Finance House

(KFH), the Gulf state's largest Islamic lender, will recommend a

20 percent capital hike to shareholders, the company said in a

bourse filing on Tuesday, which will help boost capital ratios

and fund expansion.

The company's board of directors decided on Monday to make

the recommendation when it holds its annual general meeting,

with proceeds to fund the bank's expansion both at home and

internationally, KFH said.

Any capital issue also requires approval from the country's

regulator. A potential capital increase will boost KFH's paid-up

capital to 348.5 million dinars ($1.24 billion) from 290.4

million dinars, Al Watan newspaper reported on Tuesday.

The price at which new shares will be sold during the

capital increase, which is part of the bank's five-year

strategic plan, will be determined at a later date, it added.

Shares in KFH were up 1.2 percent at 0.82 dinars at 0705

GMT, trimming year-to-date losses to 1.6 percent.

Kuwaiti banks have suffered since the global financial

crisis because of exposures to the local real estate and stock

markets whose values have dropped significantly, as well as to

investment firms which borrowed heavily in the boom years to

finance activity in the two areas.

In September, Fitch Ratings said it had downgraded KFH's

viability rating because of concerns over asset quality and loan

concentration at the lender, while its Tier 1 capital - a key

measure of a bank's reserves - lagged its Kuwaiti peers.

However, the agency said at the time a planned capital hike

to bolster reserves would be a positive step.

In November, Moody's placed all of KFH's ratings on review

for possible downgrade, with concerns over asset quality also

central to the move.

($1 = 0.2817 Kuwaiti dinars)

(Reporting by Sylvia Westall; Additional Reporting by Amena

Bakr; Editing by David French and Dinesh Nair)

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