This document provides an overview and analysis of Mongolia's economy and banking sector from 2008-2012. It summarizes Mongolia's strong GDP growth over this period, driven primarily by mining. It also outlines trends in FDI, trade, government budgets and inflation. The banking sector expanded rapidly but remains underdeveloped, with credit making up only 30-33% of GDP. Khan Bank is the largest bank and has an extensive branch network and low-cost deposit base. Challenges for the banking sector include a lack of long-term local currency funding and underdeveloped capital markets.
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"𝑩𝑬𝑮𝑼𝑵 𝑾𝑰𝑻𝑯 𝑻𝑱 𝑰𝑺 𝑯𝑨𝑳𝑭 𝑫𝑶𝑵𝑬"
𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
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⭐ 𝐅𝐞𝐚𝐭𝐮𝐫𝐞𝐝 𝐩𝐫𝐨𝐣𝐞𝐜𝐭𝐬:
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7. 7
Source: Bank of Mongolia, NSO
Exports: coal, copper, iron ore, and cashmere/leather.
Imports: machinery, heavy equipments, fuel, auto parts, and foods.
More than 90 percent of the exports go to China.
65 percent of imports come from China, Russia, and the USA.
Trade Balance (USD in millions)
2,534
1,885
2,908
4,817
4,384
3244
2137
3200
6598 6738
-710
-252
-292
-1781
-2354
-4000
-2000
0
2000
4000
6000
8000
2008 2009 2010 2011 2012
Export Import Trade Balance
8. 8
“Fiscal Stability Law” (FSL) , effective in 2013, limits the structural deficit within 2 percent
of the GDP.
Source: Bank of Mongolia, World Bank
Government Budget (MNT billion)
2156 1992
3122
4400
4968
2462 2321
3080
4792
6043
-306 -329
42
-392
-1075
-2000
-1000
0
1000
2000
3000
4000
5000
6000
7000
2008 2009 2010 2011 2012
Revenue Expenditure Balance
9. 9
17.8%
22.1%
4.2%
13.0%
10.2%
14.0%
0%
5%
10%
15%
20%
25%
2007 2008 2009 2010 2011 2012
Core Inflation National CPI
1,000₮
1,100₮
1,200₮
1,300₮
1,400₮
1,500₮
1,600₮
2008Mar
Jun
Sep
Dec
2009Mar
Jun
Sep
Dec
2010Mar
Jun
Sep
Dec
2011Mar
Jun
Sep
Dec
2012Mar
Jun
Sep
Dec
MNT Rates against USD
Consumer Price Index (y-o-y)
Source: Bank of Mongolia, NSO
CPI & FX Rates
10. 1010
Financial Sector
14 commercial banks, 1 development bank, 195 small NBFIs,162 savings & credit cooperatives,
and 17 insurance companies.
3 foreign banks have representative offices; ING, Standard Chartered Bank, and Bank of China
90-95% percent of financial sector assets are held by commercial banks.
56%
68%
75%
87% 86%
35%
-1%
16%
80%
24%
-25%
0%
25%
50%
75%
100%
0₮
4,000₮
8,000₮
12,000₮
2008 2009 2010 2011 2012
Banking Sector Assets Loans Banking Sector Assets to GDP Loan Growth
Source: Bank of Mongolia, FRC, Banks’ website
MNTbillions
13. 13
Banks’ Credits to GDP ratio
20%
27% 27%
20%
28%
32%
30% 30%
40%
133%
125% 120%
118%
115% 110%
132% 132%
133%
0%
30%
60%
90%
120%
150%
180%
210%
2003 2004 2005 2006 2007 2008 2009 2010 2011
Mongolia East Asia & Pacific (developing only)
Domestic credit provided by banking sector (% of GDP)
Total assets as of Dec 31, 2012 - USD 8,6 billion.
Top 3 banks (Khan, TDB, Golomt) make up 70% of total assets.
Banking sector grew rapidly, but Mongolia is still under banked.
Source: WorldBank
14. 14
Regulatory Requirements
Key prudential ratios set by Bank of Mongolia
Liquidity Ratio > 25% Liquid Assets / Total Deposit
Capital Adequacy Ratio >13% (Tier 1 + Tier 2 ) / Risk Weighted Asset
Tier 1 Ratio > 8% Tier 1 / Risk Weighted Asset
Reserve Requirement >12% of total deposits (MNT and FC)
Credit Concentration
Total Related Parties Lending < 20% of total capital
Single Related Party Lending < 5% of total capital
Single Borrower Lending < 20% of total capital
Foreign Exchange Risk
Open Position on Single Currency < 15% of total capital
Total Open Position < 40% of total capital
15. 15
Extensive
Branch
Network
Low Cost
Deposit
Franchise
Khan Bank Overview
1
2
3
4
3
5
6
7
Attractive
Business Mix
Rigorous Asset
Quality and
Growth
Low Cost
Deposit
Franchise
Well
Diversified
Funding Base
Low Cost
Deposit
Franchise
Consistent
Track Record of
Superior
Profitability
Low Cost
Deposit
Franchise
Supportive
Shareholding
Structure
Low Cost
Deposit
Franchise
Strong &
Experienced
Management
Team
16. 16
Khan Bank with Extensive Branch Network
► 512 branches in every parts of Mongolia;
85 are in Ulaanbaatar area and 427 are in
rural areas
► Provide banking services to estimated
80% of all households in Mongolia
► 1.8 million customers all over the country
of 2.8 million population
► 286,091 borrowers of which 80 % are
retail consumer borrowers
► 303 ATM – 37% of all ATMs in Mongolia
► 1,361,886 debit card holders
Nationwide Network Number of Branches
Number of ATMs
512 489
97 88
45
0
100
200
300
400
500
600
Khan Savings Xac Golomt TDB
303
171
48
163
125
0
50
100
150
200
250
300
350
Khan Savings Xac Golomt TDB
* Source: Bank of Mongolia and banks’ website
19. 19
Market Shares of Banks (2012 YE)
Total Capital
Total Asset Market Share
(MNT billions)
Total Loan Market Share
Total Deposit Market Share
Khan
24%
Golomt*
23%
TDB
24%
Xac
7%
Savings
9%
Others
13%
Khan
24%
TDB
24%Golomt*
22%
Xac
9%
Savings
9%
Others
12% Khan
25%
TDB
22%
Golomt*
21%
Xac
9%
Savings
8%
Others
15%
Source: Bank of Mongolia & banks’ websites
*Preliminary estimate
335
295
147
78
Khan TDB Xac Savings
20. 20
Market Shares of Banks (2012 YE)
Net Profit (MNT billions)
147
75
60
21
36 28
5
22
183
103
65
43
-
50
100
150
200
Khan TDB Xac Savings
Net Interest Income Other Income Operating Income
Income Composition (MNT billions)
2.6%
2.3%
1.4%
-0.5%
Khan TDB Xac Savings
ROA
Source: Bank of Mongolia & banks’ websites
21.4% 21.4%
10.4%
-5.9%
Khan TDB Xac Savings
ROE
*Golomt Bank’s information is not available as of April 11, 2013
71
63
15
-4
Khan TDB Xac Savings
21. Mongolia Banking Sector Challenges
Small capital of the banks
Underdeveloped interbank market, custody service, capital markets,
Lack of long term MNT funding source, maturity gap mismatch
Underdeveloped derivative market and FX hedging instruments
Legal and regulatory framework
e.g. movable assets pledge, non-banking finance business
Consistency of banks interest with government development policies
Risk Management and System Investment
Compliance, Governance and Transparency
21
24. 24
Disclaimer
This presentation has been prepared solely for informational purposes and its not to be construed as a
solicitation or any offer to buy or sell securities, commodities, or related financial instruments.
The Bank has prepared this presentation based on information available to it, including information
derived from public sources that have not been independently verified. No investment, divestment or
other financial decisions or actions should be based solely on the information in this presentation. Khan
Bank accepts no responsibility in relation to this presentation, and shall not be liable for any loss or
damage whatsoever suffered by any party arising from, relating to, resulting from or based upon the use
of this presentation and any errors or omissions therefrom.
This material must not be copied, reproduced, distributed or passed to others at any time, in whole or in
part, without the prior written consent of Khan Bank.