DBS Bank Mandiri: Buy; Rp6,600; TP Rp7,000; BMRI IJ Bank Rakyat Indonesia: Buy; Rp10,000; TP Rp11,100; BBRI IJ

BMRI and BBRI rights issue plans approved by parliament

BMRI finally obtained its rights issue plan approval from Parliament last week. Parliament accepted BMRI rights issue proposal of 2.3mn shares, which will dilute Government stake to 60%. With this, Parliament hopes BMRI could utilize the estimated rights issue proceed of Rp 12tr to expand loans in industrial, manufacturing, utilities sectors and obtain target to be one of top five ASEAN banks. Similarly, Parliament also approved BBNI rights issue plan of 3.3 bn shares which will bring free float to 40%, employee-management stock allocation to 2.5% and Government stake of about 57.5%. BBNI estimates to gather proceed of Rp 10 trilion. Bank Indonesia and Ministry of SOEs will then process the rights issue plans for BMRI and BBNI with estimated timeline before year end. However, both banks will have different execution date with estimated interval of one month to avoid disruption of market liquidity.