🔔 NEW DIGITAL LENDING REGULATION | STATE BANK: PUMP & DUMP | EARNINGS SEASON

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It’s the last day of October. There are now only two months left for you to fulfill your 2022 resolutions. Better late than never!

🤔 DID YOU KNOW?

💸 LESS DIGITAL LENDING FROM 2023

The Financial Regulatory Commission has recently announced a 70% maximum debt-to-income ratio (DIR) for digital credit products effective from next year. Let’s take a look at how this threshold - currently only applicable to bank loans - will affect the NBFIs sector.

• The maximum 70% DIR explained: Simply put, if your one-month after-tax income is ₮1 million, your monthly loan payment cannot exceed ₮700 thousand. You won’t be able to apply for additional loans, nor receive them.

The consequences

The DIR limit will likely reduce NBFIs’ lending, including their digital loans. It might as well create an intense competition among NBFIs desperately trying to woo customers who haven’t reached their 70% ceiling. The income of NBFIs is also expected to fall due to the decrease in their lending, leading to less opportunities for the general public to receive small consumer loans.

Opinion of NFBIs

Our team asked some industry representatives about their stance on the matter. Here’s what they think:

• Omni Capital: It seems like there’s a lack of information on how the DIR should be calculated when it comes to digital loans. The amount of credits to be granted to new customers will decrease depending on the DIR. The positive thing is that customers won’t be burdened with excessive loan payments.

• Sendly: The recently listed company (SEND) was unable to give any comments on the issue.

• Simple: Straight-line amortization puts borrowers at risk of being burdened with debt. This is why Simple has always provided suitable loans based on customers’ DIR and financial capabilities. So calculating repayments based on the DIR is a way of preventing excessive debt burdens.

In the end

With the advent of various apps, getting a small consumer loan has become easy as never before. As a consequence, Mongolians are getting more and more accustomed to digital financial services, with online borrowers accounting for as much as 80% of all NBFIs’ customers. The trend is unlikely to completely disappear - people will just have to start paying more attention to their DIRs.

📉 DATA STORY

It's been 3 weeks since the State bank went on the secondary market. In the first 2 weeks, we saw a classic pump & dump where the stock price doubled in the first few trading days. The price moderated around ₮720 last week which is 22% higher than the IPO price. Just so you know, the daily price fluctuation limit on the Mongolian Stock Exchange is 15%.

💰 Q3 2022

Do keep in mind that public companies are not obliged to post their financial statements for the third quarter of a year - only half-yearly reports are mandatory.

Golomt Bank's net profit increases by 343.5%. The company reported a ₮480.9 billion interest income for Q3 ahead of their possibly upcoming, but not yet announced IPO. In Q3 2021, the bank’s interest income was 12.8% less. The non-interest income almost doubled as well, resulting in a net profit of ₮78.5 billion.

Ard Credit NBFI (ADB) makes a net profit of ₮756.1 million. Compared to the same period last year when the company’s net profit stood at ₮94.5 million, this is a 14.3% growth. The increase can be explained by the net interest income rising by 45% to ₮5.8 billion.

Mongolian Mortgage Corporation (MIK) generates ₮1.2 billion in net profit, after experiencing a loss of ₮1.8 billion in the same period last year. Although their revenue for Q3 2022 reached ₮2.4 billion, leading to a positive financial report, their share price has fallen by 10.3% to ₮13 thousand since the beginning of the year.

InvesCore NBFI’s (INV) net profit reaches ₮23 billion, 96.6% more than last year. The main reason behind the profit - the company’s interest income that grew by 2.1 times from Q3 2021.

Mongol Basalt (MBW) reports a net profit of ₮3.3 billion. Their sales revenue increased by 67.8% from the same period last year to ₮9.8 billion, with their share price rising by 13.1% and currently trading at ₮223.53.

Consolidated losses of Gobi (GOV) and its subsidiaries decreased by 50%. In the third quarter of this year, their sales revenue reached ₮104.9 billion, which is a 35% increase from the same period last year. As a result, the combined loss was halved to ₮13.5 billion.

🏃‍♀️ QUICK STORIES

📌 Mobifinance NBFI’s e-money license extended indefinitely. In 2018, they became the first company to ever be granted such a license. It is issued for an initial period of four years by the Bank of Mongolia with a possibility of being extended. As of now, Mobifinance is the only enterprise that has fulfilled the conditions for an indefinite extension.

📌 Rio Tinto issues letter to Turquoise Hill (TRQ) shareholders. The letter outlines the future of TRQ and reiterates Rio Tinto’s commitment to Oyu Tolgoi. It also states that the investors who decide not to accept the Rio Tinto proposal will be welcomed as ongoing investors in TRQ.

📌 Egune, the first digital guide that supports the Mongolian language. It was presented during the event on Ulaanbaatar’s digital transition plan and can currently provide information on home automation and government services, as well as weather, air quality, and traffic congestion data.

📌 Oyu Tolgoi pays ₮716.8 billion in taxes and other payments in Q3 2022. The company exported 41.3 thousand tons of copper and 56 thousand ounces of gold. The amount of copper in concentrate extracted from open pit mines decreased by 13% from the same period last year, reaching 36.3 tons.

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