🏛️ Special edition: Banking sector

POWERED BY

It’s already August! If you had something planned for this summer, you only have a month left. Also, we can’t believe it’s been half a year since we sent our first edition in late January. Time really flies fast!

🤔 DID YOU KNOW?

🏛️ BANKING SECTOR PROFITS SOAR

The banking sector is prospering at times of economic downturn and geopolitical tensions. The total assets of the Mongolian banking sector reached ₮42 billion in the first half of this year, while the net profit grew 79.7% YoY, hitting ₮580 billion. Many factors contributed here, but we will have a clear picture after an asset quality review (AQR) is conducted by the Central Bank of Mongolia within this August. The major 5 bank IPOs are postponed and expected to begin this fall after the AQR is conducted.

And for now, let’s take a look at the banks’ performance in detail!

Khan Bank: the MVP

Khan Bank, the largest bank in Mongolia, continues to lead the banking industry.

• The biggest: Khan Bank is the largest commercial bank in Mongolia, with a total of 548 branches and 1,275 ATMs, serving 2.6 million citizens. Their total assets reached ₮13.6 trillion last quarter, which is 2.3% lower than the same period last year. However, the bank still accounts for 32.3% of the banking sector’s total assets.

• Interest income 🔼, expenses 🔽: On the one hand, their interest income, which stood at ₮564.2 billion in the first half of 2021, increased by 15% YoY and reached ₮648.7 billion. On the other hand, the savings amount decreased by 20.2% to ₮6.4 trillion, reducing the interest paid to savings by 23.6%. The net interest expense fell by 15.5%.

• Net profit grew 70.7%: Khan Bank’s net profit increased from ₮131.6 billion in the first half of last year to ₮224.6 billion in 2022. Not only did the interest income increase and interest expense decrease, but the non-interest income also rose by 71.6%, reaching ₮215.2 billion.

TDB: Profit soaring despite high NPLs

The Trade and Development Bank's net profit increased by 138.1% YoY, reaching ₮149 billion.

• NPLs persist: With NPL worth ₮676.8 billion (13.8%), TDB fares the worst among the 5 systemically important banks. As for its net loans, they grew to ₮4.9 trillion from ₮3.7 trillion in the first half of 2021 - a 31.9% YoY increase.

• Non-interest income up 133.8%: TDB's interest income fell by 7.9% likely due to the increase in NPLs. However, as the leader in foreign transactions, the bank has definitely benefited from the rising dollar - the exchange rate income doubled from ₮26.1 billion to ₮51.9 billion, resulting in a 133.8% growth in non-interest income.

• The ₮149 billion net profit stems from the increase in non-interest income mentioned above. Although the interest income decreased, the interest expense was cut in half. This lead to the net interest income of ₮115.3 billion - an increase of 5% compared to the previous year.

Golomt Bank: net profit grows 6.8x

In the first half of this year, Golomt Bank made a profit of ₮57 billion - twice as much as the amount for the entire year of 2021 and 6.8 times more compared to the same period of last year.

• Equity increased by ₮133 billion: The bank’s equity ratio rose to 14.4% from 12.6% in the first half of 2021, reaching ₮715 billion. The required ratio of the lowest equity ratio is set at 12%.

• Revenues 🔼, expenses 🔽: Golomt Bank’s revenues grew 18% YoY, while expenses decreased by 4% YoY. If we dissect the revenues, the interest, trading and commission incomes increased by 11%, 193% and 51%, respectively. As for the expenses, the risk fund and interest expenses fell by 32% and 20%, respectively.

• Changes in funding structure: The amount of savings decreased, while other sources of funding rose. To be exact, savings at the bank fell by ₮77 billion from the same period of last year, whereas current account funds, funds drawn from other banking and financial institutions and other types of sources increased by ₮212, ₮371 and ₮101 billion, respectively.

State Bank: the ultimate public service provider

With 495 branches all over the country, the State Bank is second only to Khan Bank in terms of geographical scope. Providing 90% of total child benefits, 55% of pensions, and 80% of welfare benefits, it delivers most public services among the 5 major banks.

• Net loans: The State Bank’s net loans increased by 11.8% and reached ₮2.3 trillion. The NPL ratio finally fell below 10%, a number which persisted last year. About 70% of the total loans are personal loans.

• Current account funds: While the overall banking sector’s current account funds increased by only 12% YoY, the State Bank’s current account funds grew as much as 45.6% YoY, reaching ₮811.5 billion. This can be explained by the fact that the bank carries out the most transactions related to welfare benefits.

• Net Profit: The bank’s net interest income rose 28.8% in the first half of this year to ₮111.2 billion thanks to the interest income increase and decrease in interest expense. As a result, the net profit increased by 125.2% from the first half of last year and reached ₮69.8 billion.

XacBank: the ultra-low NPLs

XacBank ended the first half of the year with ₮172 billion in interest income and a net profit of ₮48.9 billion. As for the key performance indicators…

• Loan balance (+30.4%): The bank's net loans reached ₮1.97 trillion in Q2 2022, increasing by 30.4% from the same period of last year. Despite the growing loan portfolio, the NPL ratio stands at only 3.9%.

• Net interest income (+60.2%): In the first half of the year, the bank’s interest income increased by 10.2% YoY to ₮172 billion and interest expenses decreased by 22% to ₮73.9 billion, which resulted in a 60% growth in net interest income.

• Net profit (+98%): As a result of loan growth, interest expense reduction, and non-interest income growth (including trading and commission income), XacBank’s net profit doubled to ₮48.9 billion.

📈 DATA STORY

The social insurance contributions paid by the 1.03 million insureds increased by 22.9% in the first half of this year compared to the same period last year. In addition, 83.7% of the social insurance fund’s total revenue was generated by the pension insurance fund. However, over the last 10 years, the social insurance fund’s revenues have not been able to cover its expenses, resulting in a loss of ₮366 billion in the first half of 2022.

🏃‍♀️ QUICK STORIES

📌 Mongolian Mining Corporation (0975.HK) sells 421.1 thousand tons of coal in 2022 Q2, a 358% YoY increase. Considering that's a 17% growth, compared to the previous quarter, the company's activities have conspicuously revived from the stagnate situation it experienced at the beginning of the year.

📌 “Selenge-2022” Mongolia-Russia joint military exercise to begin on today. The Russian military which arrived in Mongolia for “Selenge-2022” will leave its territory as soon as the exercise ends on August 15. As of now, about 300 units of Russian military equipment and weapons, as well as about 1,000 servicemen, are present on Mongolia’s territory.

📌 MonosFoods JSC (MFC) makes net profit of ₮1.5 billion in 2022 Q2. This is an increase of 177.7% from the same period of last year. As for the total assets, they reached ₮19.9 billion, of which 32.2% consisted of liabilities. It looks like MonosFoods JSC's food supplements sold pretty well.

📌 Apex Capital LLC and Tavan Bogd Capital LLC to work as underwriters of Monbeef LLC's IPO. The company is looking to offer 30% stake to the public and gather ₮2.9 billion. The IPO orders will start tomorrow and will be held between August 8-12, 2022.

🟦 TOP NEWS

1. Mountain Shadows, Western Mongolia. (NASA Earth Observatory)

2. Chinese ports linking Mongolia reopen, facilitating bilateral trade and enhancing cooperation. (Global Times)

3. Mongolia's forex reserves drop to $2.8 billion. (Xinhua)

4. ‘Nomadic Mongolia-2022’ festival to be held in August. (MONSTAME)

5. New freight train service links east China city with Mongolia. (Xinhua)

6. The HU performs at Fuji Rock Festival. (MONSTAME)

SPIRIT OF GOBI FESTIVAL 2022

“Spirit of Gobi” is truly a one-of-a-kind experience. Contemporary art and electronic music showcased right in the middle of the Gobi desert is comparable to almost nothing else. Well, the fans of the Burning Man festival might disagree, but let’s not quibble over things like that.

Anyway, do check out their website and this article on the 2020 “Spirit of Gobi”.

The details:

• Where: Grand Gobi Resort, Dalanzadgad, Umnugovi, Mongolia

• When: August 4-7, 2022

• How to attend: Buy your tickets here