🏦 BANK & NBFI GROWTH | HOUSING CRISIS | TOP COMPANIES

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 🏦 FINANCIAL SECTOR ENJOYS DECADE OF RAPID GROWTH

Both banks and non-bank financial institutions (NBFIs) in Mongolia have grown rapidly in the past decade, but NBFIs have outpaced banks in some key metrics.

• Banks: Banks still dominate the market in terms of size and profitability. Their total capital has quadrupled to ₮4.8 trillion, and their net profit has increased five times to ₮1 trillion since 2012. Their net credit to customers has also tripled to ₮20.3 trillion.

• NBFIs: However, NBFIs have expanded faster in relative terms. Their total capital has increased 14-fold to ₮3.4 trillion and their net profit has surged 16.8-fold to ₮300 billion in the same period. Their net loans have jumped 16.7-fold to ₮2.5 trillion, driven by a 5.5-fold rise in electronic loans to ₮1.2 trillion in the past three years.

A comparison of ratios reveals some of the differences between the two sectors.

• Return on assets (ROA): NBFIs have a higher ROA of 9%, compared with 2% for banks. This suggests that NBFIs are more efficient at generating profits from their assets.

• Return on equity (ROE): Banks have a higher ROE of 21%, compared with 14% for NBFIs. This indicates that banks are more effective at using shareholders’ funds to generate profits.

• Net profit margin: NBFIs have a higher net profit margin of 45%, compared with 27% for banks. This implies that NBFIs have lower costs than banks.

The rapid growth of NBFIs reflects their adoption of fintech solutions that have enabled them to reach more customers and offer more services. Banks, meanwhile, have also invested in digital technology, such as neo and digital banks, to compete with NBFIs. The future of the financial sector will depend on how these two types of institutions collaborate and innovate.

📈 DATA STORY: MINING COMPANIES DOMINATE MONGOLIA’S TOP TAXPAYER LIST

Mining companies continue to top the annual list of Mongolia’s largest taxpayers, released by the government on Thursday.

Seven of the ten companies on the list are in the mining sector, reflecting the country’s reliance on its natural resources. The other three are Khan Bank and Golomt Bank, two of Mongolia’s largest lenders, and APU, a food and beverage producer.

The top 100 companies paid ₮4.7 trillion ($1.6 billion) in taxes in 2022, accounting for 30% of the total tax revenue, and employed 71,500 people, according to the government.

During the announcement, policymakers reiterated their commitment to liberalize trade and attract foreign investment. They also promised to build an automatic container terminal to boost coal exports, reform the tax system and encourage minerals trade on the stock exchange.

Mongolia, a landlocked country sandwiched between China and Russia, has vast deposits of coal, copper and gold. However, it has struggled to balance its economic development with environmental and social concerns.

🏠 ULAANBAATAR FACES HOUSING AFFORDABILITY CHALLENGE

Ulaanbaatar’s housing market is heating up, with prices rising by 9.9% year on year in April. The average cost of a square metre of new housing reached ₮3.5 million ($1,000), according to official data.

But the city’s property boom is uneven, with wide variations across districts and types of housing. Older houses are 5.7% cheaper than new ones on average, and the price gap between the most and least expensive areas is more than ₮1.2 million per square metre.

Khan-Uul, the city’s uptown district, has the highest average price for new housing at ₮3.8 million per square metre, 8.8% above the city-wide average and 35.2% more than Songinokhairkhan, a district in the west.

The surge in housing prices reflects several factors, including rising construction costs, a weaker currency, and increased mortgage lending.

• Construction costs jumped by 30.9% in the first quarter compared with a year earlier, driven by a 10.1% increase in the price of materials, a 1.8% rise in the cost of renting machinery and a 0.5% increase in wages.

• The depreciation of the tugrik against the US dollar has also pushed up the cost of imported building materials. The tugrik fell by 23.5% year on year in April, meaning that $150 worth of materials that cost ₮427,400 a year ago now costs ₮527,700.

Mortgage lending, which has been a key driver of housing demand in recent years, is expected to slow down as the central bank tightens monetary policy to curb inflation. This could dampen the outlook for housing prices in the coming months.

As the capital of Mongolia attracts young and rural workers with its promise of better jobs and services, Ulaanbaatar has experienced a surge in construction over the last few decades. Yet, many still struggle to afford housing in the city, where prices are high relative to incomes.

🏃 QUICK STORIES

📌 XacBank and Trade and Development Bank get the green light for public share offerings by Mongolia’s financial watchdog, completing a key step in the country’s banking reform. The move is expected to further enhance the stock market and the banking sector.

📌 Steppe Gold has raised $12.1 million in a private placement that was oversubscribed by investors including Eric Sprott, a Canadian billionaire and mining financier. The company, which operates the ATO gold mine in eastern Mongolia, sold 11 million shares at $1.10 each, above its initial target of $9 million.

📌 Khan Bank has agreed to collaborate with Shinhan Bank, one of South Korea’s biggest banks, on digital transformation and innovation. The memorandum of understanding, signed on Monday, will enable Khan Bank to tap into Shinhan Bank’s expertise and experience in areas such as digital strategy, fintech, e-commerce and green finance.

📌 Inflation: Consumer prices surged 11.3% year-on-year in April, driven by a 17% jump in food costs and a 6.7% rise in both energy and healthcare bills.

⭐ TOP NEWS

• An interview with the prime minister of Mongolia (The Diplomat)

• Mongolia’s building boom traps capital residents in concrete jungle (Yahoo News)

• Chart of the Day: Mongolia is the new Australia in supplying coal (Money Control)

• Second Asia Mining Innovation Development Summit in Beijing (Montsame)

• Pen America condemns China’s arrest of exiled Mongolian writer and historian Lhamjab A. Borjigin (Pen America)

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Editor: E. Zolbayar
Writer: A. Bilguun

Disclaimer: The information Inside Mongolia provides is for educational and informational purposes only. It is not intended to be and does not constitute financial advice, trading advice, or any other advice. The decision whether to consider the information we provide is solely our readers' independent decision.