JP Morgan - overhang on the banks?

Bank Mandiri (BMRI) and Bank Negara Indo (BBNI) rights issue – Parliament asks for a higher deal size for BMRI and BBNI rights issue, of Rp25trn (from Rp22trn earlier, Rp9trn of which is for BBNI and Rp13trn for BMRI). The comment was made by head of commission VI Airlangga Hartarto after a meeting with BBNI’s BOD yesterday. BMRI’s CEO is hoping that parliament can approve the rights issue plans within this month. Ministry of SOE targets parliamentary approval by 5 Oct, such that BBNI rights issue can happen in early Dec while BMRI can go in mid Dec. My take – this rights issue timetable may proof to be a drag for the Indo bank sector performance in 4Q10. The Rp25trn new issue accounts for about 12% of the current free float for the five big cap banks that totalled to around Rp207trn.