Mansek Bank Rakyat Indonesia a takeaway from a company visit (BBRI,Rp10,600, Buy,Rp12,000)

We have just visited BRI and below are the highlights:
The increase in primary reserves will lower the bank ’s interest income by around Rp200bn, however there has yet intention from the bank to increase the lending rate.The bank plans to maintain its LDR below 100% and above 78%hence will not be required to have additional RR by Mar11 (at end Jun10,LDR recorded at 88.9%).

There is no firm statement on whether Bukopin will be taken over by BRI.So far BRI has yet appointed advisor for this possible transaction or conducted internal due diligence for such transaction.However,a possibility remains even though in the short term it might affect the bank ’s performance negatively due to Bukopin ’s much lower NIM and ROAE.

Until Aug10 there has yet significant improvement in terms of medium size NPL (recorded at 14.9%at end Jun10).The management still focused on efforts to settle the NPL rather than performing aggressive write off.

At current price,BRI is trading at 2011P/BV of 3.0x and PER of 10.2x.We still like BRI for its ability to generate higher than average NIM and ROAE.