11.16-17.2015, PRESENTATION, Where does the banking sector fit it, Norihiko Kato
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Transcript of 11.16-17.2015, PRESENTATION, Where does the banking sector fit it, Norihiko Kato
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Mongolia’s Macroeconomic Backdrop
� Mongolian economy growth slowed in recent years. GDP grew by 7.8% in 2014 and
slowed to 2.5% in Q3 2015.
� Domestic demand is under pressure from high interest rates in the market and
continued currency depreciation.
� The tightening of monetary policy since 2H2014 and unwinding of PSP resulted
slower money supply in the economy and moderating local currency depreciation
in recent months.
� Fiscal Stability Law, became effective in 2013, limits fiscal deficit to 2% of GDP and
government debt to 40% of GDP in 2014. The debt ceiling was increased to 58.3%
in Jan 2015 by the Parliament.
� Overall banking sector NPLs increased due to economic downturn caused mainly
by weak commodity prices and FX rate.
� Oyu Tolgoi (OT) underground mining development is expected to resume in 2H
2016.
Growth mainly driven by credit driven policies
Growth mainly driven by FDI inflow
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GDP, M2, FDI GROWTH OF MONGOLIA
Source: National Statistical Office, Bank of Mongolia
19%
24%
36%
26%
19%
12%
424%
285%242%
179%
-200.0%
-100.0%
0.0%
100.0%
200.0%
300.0%
400.0%
500.0%
-2.0%
8.0%
18.0%
28.0%
38.0%
48.0%
58.0%
68.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2011 2012 2013 2014 2015
Nominal GDP growth, yoy (LHS) M2 Money growth, yoy (LHS) FDI growth, yoy, (RHS)
-1.3%
4.2%
16.0%
4.9%
-1.0%
5.0%
11.0%
17.0%
23.0%
-20%
0%
20%
40%
60%
80%
2009 2010 2011 2012 2013 2014 2015
M2 money yoy % (LHS) CPI yoy % (RHS)
5
June 2013
8% mortgage program
Dec 2012
Price Stabil ization Program
Jul 2014 - Monetary policy tightening
Unwinding PSP
Source: National Statistical Office
INFLATION VS. M2 MONEY GROWTH
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FOREIGN DIRECT INVESTMENT
Source: Bank of Mongolia
$1,691
$4,715$4,452
$2,140
$382 $157
424.3%
-5.6%
-51.9%
-82.2% -71.2%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2010 2011 2012 2013 2014 2015
YTD FDI inflow into Mongolia (mil USD) FDI yoy growth
FDI inflow to GDP (%)
2010 2011 2012 2013 2014 Q3 2015
23.6% 45.3% 36.3% 17.0% 3.2% 1.8%
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FOREIGN RESERVES
$2,908
$4,126
$3,108
$1,318 $1,413
1,374.2₮
1,662.5₮
1,824.6₮1,903.3₮
1,993.8₮
1,200
1,300
1,400
1,500
1,600
1,700
1,800
1,900
2,000
2,100
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2011 2012 2013 2014 2015
BOM Reserve /mil USD/ (LHS) Monthly avg. USD/MNT rate (RHS)
Chinggis Bond Issuance (1.5b US$)
Source: National Statistical Office, Bank of Mongolia
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BANK OF MONGOLIA POLICY RATE, M2 MONEY GROWTH AND MNT SAVINGS RATE
Source: Bank of Mongolia, National Statistical Office
13.00%
12.3%12.0%
12.2%
-10%
5%
20%
35%
50%
65%
80%
9%
10%
11%
12%
13%
14%
15%
2009 2010 2011 2012 2013 2014 2015
M2 money growth yoy % (RHS) Policy Rate (LHS) MNT Savings Rate (LHS)
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Source: Bloomberg
13.9%14.3%
15.0%
15.8%
16.8%
17.5%
12%
13%
14%
15%
16%
17%
18%
19%
20%
84 days 196 days 365 days 3 year 5 year 10 year
GOVERNMENT MNT DENOMINATED BOND YIELD (as of Nov 2015)
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Mongolian Banking Sector Highlights
�Banking sector has grown rapidly in both loans and deposits
since 2010.
�Top three largest banks account for 64-73% of total assets, total
loans, total deposits and total equity
�Banking sector’s high loan and deposit growth has stopped,
compared to high growth rates of the last few years.
�Banking sector non-performing loan ratio reached 7.0 % as of
Q3 2015.
13.3 15.9 18.2 20.9 20.7 21.4 20.9 22.6 20.8 21.9 21.3
42.1%
60.4%
71.0%74.1%
55.9%
34.4%
15.3%
2.1% 2.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2013 2014 2015
Banking Sector Total Assets (tril MNT)
Total Asset growth
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BANKING SECTOR TOTAL ASSET AND ANNUALIZED GROWTH
Source: Bank of Mongolia
Bank
Reserve
10%
BoM bills
3%
Gov.
Bonds
10%
Foreign
assets
5%
Other
securities
3%
Total loan
55%
Other
assets
14%
12
2.3
5.1
12.611.9
28.2%
0.7%
23.0%
72.8%
21.7%
56.7%
16.1%
-5.3%
-
3
6
8
11
14
Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3
2008 2009 2010 2011 2012 2013 2014 2015
Tri
llio
n M
NT
Total loan oustanding Annual change (%)
TOTAL LOAN OUTSTANDING AND YOY GROWTH CHANGES
Source: National Statistical Office
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NON-PERFORMING LOAN
836.8
7.2%
17.4%
11.5%
5.8%
4.3%5.3% 5.0%
7.0%
-
200
400
600
800
1,000
Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3
2008 2009 2010 2011 2012 2013 2014 2015
Bil
lio
n M
NT
Amount of NPL NPL % (excl. bankrupt banks)
Source: National Statistical Office
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8% MORTGAGE LOAN AND ANNUAL GROWTH
0.3
0.9
1.21.5
1.71.8
2.02.2
2.42.5
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2013 2014 2015
8% mortgage loan outstanding (tril MNT)
Source: National Statistical Office
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BANKING SECTOR SAVINGS AND CURRENCY COMPOSITION
Source: Bank of Mongolia
73
%
75
%
71
%
77
%
71
%
27
%
25
%
29
%
23
% 29
%
12.3%13.1%
7.0%
5.8%6.5%
3%
5%
7%
9%
11%
13%
15%
0
1
2
3
4
5
6
7
8
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2010 2011 2012 2013 2014 2015
USD Savings (tril MNT), LHS MNT Savings (tril MNT), LHS
MNT Savings Rate (%), RHS USD Savings Rate (%), RHS
Khan
26.8%
TDB
23.9%Golomt
16.6%
Xac
10.8%
State
8.4%
Others
13.5%Khan
23.8%
TDB
25.7%
Golomt
16.0%
Xac
9.1%
State
8.1%
Others
17.3%
Total Capital (bil MNT)
Total Assets Total Loans
Core Deposits*
Source: Bank of Mongolia & banks’ websites as of Q3 2015
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* not included: "Liabilities to Banking Sector, IFI and TDB bond”
Khan
24.2%
TDB
20.5%Golomt
19.9%
Xac
7.9%
State
10.1%
Others
17.4%
766.4716.2
413.6
251.3162.6
-
140
280
420
560
700
840
Khan TDB Golomt Xac State
MARKET SHARES OF BANKS: 3Q 2015
Market Shares of Banks Market Shares of Banks (as of Q3 2015)
Net Profit After Taxes (bil MNT)
Liquidity Capital Adequacy Ratio
ROE, ROA
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Source: Bank of Mongolia & banks’ websites
40.0% 41.6%
30.4%
37.4% 35.7%
0%
10%
20%
30%
40%
50%
Khan TDB Golomt* Xac State
20.9%
16.4% 16.3%18.6%
15.3%
0%
5%
10%
15%
20%
25%
Khan TDB Golomt Xac State
2.7% 1.8%0.6% 1.1% 0.8%
26.8%
15.5%
6.1%
14.9%
9.3%
0%
5%
10%
15%
20%
25%
30%
Khan TDB Golomt Xac State
ROA ROE
99.1
74.3
15.5 16.111.1
-
24
48
72
96
120
Khan TDB Golomt Xac State
MongoliaKhan Bank
Xac Bank Golomt
BankTDB DBM
State Bank
Ownership Gov. Private Private Private Private Gov. Gov.
B2 negative
B2negative
B3negative
B3negative
B3negative
B2negative
B2negative
Counterparty Risk
AssessmentB1/NP B2/NP - B2/NP B2/NP
B+negative
Bnegative
Bnegative
- - -B
negative
Bstable
- -B-
stableB-
stableB
stable-
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Source: Rating agency websites as of Nov 2015
GLOBAL CREDIT RATINGS
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Mongolia Financial Sector Latest Initiatives
� Minimum share capital requirement of the commercial banks is raised to 50
bil MNT.
� Stronger corporate governance regulation by BoM.
� 1% loan loss provision for new loan issuances after Aug 2014.
� Since Mar 2014, long term swap transaction with BoM has been available
for commercial banks.
� In July 2015, the Parliament enacted the Law of Mongolia on Movable and
Intangible Property Pledges (MIPP) and the Law of Mongolia on the
Implementation of the MIPP Law, which will be fully effective starting from
Sep 1st, 2016.
� Investments into government bonds became available for retail investors
through Mongolian Stock Exchange.
� 3 commercial banks have obtained “Custodian Banking License” in 2015.
Disclaimer
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The Bank has prepared this presentation based on information available to it, including informationderived from public sources that have not been independently verified. No investment, divestment orother financial decisions or actions should be based solely on the information in this presentation. KhanBank accepts no responsibility in relation to this presentation, and shall not be liable for any loss ordamage whatsoever suffered by any party arising from, relating to, resulting from or based upon the useof this presentation and any errors or omissions there from.
This presentation has been prepared on a confidential basis solely for the use of the intended recipient.This material must not be copied, reproduced, distributed or passed to others at any time, in whole or inpart, without the prior written consent of Khan Bank.
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