UPDATE 2-Indonesia's BRI sees '09 loan growth of 18-22 pct

* Lending is expected to grow 18-22 percent

* Non-performing loans are expected to be below 5 percent

* BRI to cut 2008 dividend payout ratio to 35 percent

By Tyagita Silka and Andreas Ismar

JAKARTA, May 11 (Reuters) - PT Bank Rakyat Indonesia Tbk (BBRI.JK), Indonesia's third-largest lender, said on Monday it expects its lending to grow 18-22 percent this year, above a government target for the banking sector.

The bank said it had also proposed cutting its 2008 dividend payout ratio to boost its capital.

Indonesian authorities have been putting pressure on banks to crank up lending in order to help shield the economy from the global economic crisis.

Many banks have been reluctant to cut lending rates, citing the need to keep extra cash amid market uncertainty, despite a series of central bank interest rate cuts.

The central bank expects overall bank lending to be 15-16 percent this year, down from about 30 percent in 2008, a deputy central bank governor said last month. [ID:nJAK345322]

"Lending expansion will be carefully selected and prioritised on small-, micro-, and medium-sized businesses," the state bank said in a statement, adding that it aimed to keep such lending to 80 percent of its total loan portfolio.

"To support lending growth, the bank will strengthen its third-party deposits, which are expected to increase 15 percent."

The central bank has cut its benchmark policy rate by a total of 2.25 percentage points since December to 7.25 percent in a bid to drive growth in Southeast Asia's biggest economy and boost bank lending.

The bank, with a market capitalisation of $7.1 billion, also said that its gross non-performing loans this year were expected to be below 5 percent and that it should maintain profit growth at 10-15 percent in 2009.

BRI managing director Sulaiman Arif Arianto said that the bank had proposed cutting its 2008 dividend payout ratio to 35 percent from about 50 percent previously to boost its capital.

The move is in line with peers such as PT Bank Mandiri Tbk (BMRI.JK) and PT Bank Central Asia Tbk (BBCA.JK), which have increased their retained profit to anticipate worsening quality of lending amid a slowing economy.

BRI reported on March 31 a 23 percent increase in 2008 net profit to 5.96 trillion rupiah ($577.5 million) compared to 4.84 trillion rupiah a year earlier, beating analysts' forecast of 5.58 trillion rupiah.

Shares in BRI fell 1.67 percent to 5,900 rupiah in line with a 1.7 percent fall in the broader market .JKSE. ($1 = 10,320 rupiah) (Writing by Sonya Angraini and Dicky Kristanto; Editing by Ed Davies)