Bank Rakyat Indonesia: Buy; Rp3,750; TP Rp5,000; BBRI IJ Undisbursed loans decreased by Rp10tr - DBS

BRI’s undisbursed loans have decreased by 31.5% q-o-q to Rp21.7tr in 2Q11 thanks to many corporate initiatives to support the loan growth. BRI, together with BNI and Mandiri, are currently preparing the masterplan for Indonesia ’s economy acceleration and expansion program (MP3EI). MP3EI is the President’s initiative that was recently launched with strong focus on micro, small and medium business entity expansion. With this program, BRI is expecting only Rp10tr in undisbursed loans in 2H11. As for Kredit Usaha Rakyat-KUR (micro lending), since 2008, BRI has disbursed a total of Rp29tr with Rp7tr disbursed within 5M11. The bank is optimistic that they can disburse another Rp1tr by the end of 2Q11.

On the liability side, deposit from micro customer (Simpedes) has increased 20% y-o-y to Rp88.03tr supported by many promotional events held in the rural branches. This Simpedes account is really important for BRI as it contributes 30% of its deposits. Funds received from Simpedes are strictly disbursed for micro lending purposes in rural branches.

BBRI is our top pick among our Indo banks coverage. We remain positive on BBRI ' s earnings and growth momentum despite minor hiccups in its commercial NPLs. Maintain Buy with Rp7,700 TP.