INVEST MONGOLIA September 3, 212 Frontier 6th Annual Conference Norihiko Kato Acting CEO, Khan Bank
Banking Industry in Mongolia
Mongolia Macroeconomic Overview Overview GDP per capita (U$) Since 21, Mongolia has made strong economic recovery. Real GDP grew by 17.5% in 211, making Mongolia one of the fastest growing countries. Growth rates were 42.5% in wholesale and retail, 16% in manufacturing, 14% in construction, and 8.7% in mining and quarrying In the Banking system, loans grew by 72% and deposits grew by 46% in 211. 9. 8. 7. 6. 5. 4. 3. 2. 1.. 1.491 1.98 1.6 2.3 3.288 4.321 5.226 6.156 6.516 7.684 27 28 29 21 211 212E 213E 214E 215E 216E Robust GDP growth (U$ in trillion) GDP composition by sector US$ 1 8 6 4 2 2.6 2.8 2.8 3. 27 28 29 21 3.5 3.7 211 212E 4.4 213E 5.1 214E 5.6 215E 6.4 216E 32.8% 3.5% 6.6% 7.1% 2.2% 13.% 9.7% 7.2% Mining & quarrying Agriculture Wholesale and retail trade Transportation and storage Manufacturing Real estate Government Others
Mongolia Macroeconomic Overview Trade Balance Foreign Direct Investment (in U$m) 8 6526 4 388 6 4 2-2 -4 478 32 2117 3244 3313 298 2534 2137 2262 1889 1885 27 28 29 21 211 212 2Q Export Import Trade Balance 3 2 1 163 839 57 185 191 36 25 26 27 28 29 21 211 Export destination Export composition 3% 2% 4% China 6% 5% Mineral products 5% 8% Canada Textiles 86% Russia UK Others 81% Precious metal & jewlery Others
Mongolia Macroeconomic Overview Budget Balance Foreign reserves 6 5 4 3 2 1-1 4792 44 2462 2321 3122 38 188 1747 2156 1992 27 28 29 21 211 3 25 2 15 1 5 975 637 1122 1155 2457 Revenue Expenditure Balance 27 28 29 21 211 25% 2% Inflation 16 15 MNT rate against USD 15% 14 1% 13 12 5% 11 % Core Inflation National CPI 1 28 Mar Jun Sep Dec 29 Mar Jun Sep Dec 21 Mar Jun Sep Dec 211 Jan Mar Jun Sep Dec 212 Jan Feb Mar Apr May Jun
Banking Sector Development 14 commercial banks, 195 small NBFIs,162 savings & credit cooperatives, and 17 insurance companies. The largest three banks (Khan, TDB, & Golomt) make up the 7% of the total assets and 68% of the total loans in the system. The largest 5 banks (Top 3, Xac, & Savings) make up the 87% of the total assets and 85% of the total loans in the system. Total Asset Market Share (212 2Q) Total Loan Market Share (212 2Q) Savings 8% XacBank 9% Others 15% Khan Bank 23% Savings 8% XacBank 1% Others 11% Khan Bank 25% Golomt 22% TDB 23% Golomt 23% TDB 23%
Banking Sector Development Banking Sector Asset Banking Sector Loan 1 6% 6 1% 8 6 4 2 5% 41% 21% 11% 28 29 21 211 Assets Growth 5% 4% 3% 2% 1% % 5 4 3 2 1 71,16% 25.31% 25.97% -6.64% 28 29 21 211 Loan /net/ Growth 8% 6% 4% 2% % -2% Banking Sector Deposit Banking sector Equity 8 6 4 2 42.18% 54.64% 24.52% 23.33% 28 29 21 211 7% 6% 5% 4% 3% 2% 1% % 8 6 4 2 76.96% 66.9% -9.57% -32.35% 28 29 21 211 1% 8% 6% 4% 2% % -2% -4% Deposit Growth Equity Growth
Banking Sector Development Banking sector Non-performing Loans (MNT billions) 7 6 5 4 3 2 1 17.4% 11.5% 7.1% 8.% 5.8% 4.5% 3.% 4.8% 2.8% 2.3% 1.5% 2.% 27 28 29 21 211 212 2Q 2% 18% 16% 14% 12% 1% 8% 6% 4% 2% % Banking Sector Gross Loan Banking Sector NPL Banking Sector NPL Ratio Khan Bank NPL Ratio
Banking Sector Development Total Asset Market Share (212 2Q) Number of Branches (YE211) 2 Khan 6 5 53 497 16 4 3 Loan (MNT in billions) 12 8 4 XAC TDB Savings Golomt 2 1 4% 3% 92 88 42 Khan Savings XacBank Golomt TDB Fee Income (case of KB) 2% 5 1 15 2 25 Deposit (MNT in billions) 1% % -1% 27 28 29 21 211 Transfer Fee Card Service Fee SMS Banking Source: TDB & Golomt & Xac & Savings Website, audited report
Banking Sector Development Consistent Profitability (Khan bank) Superior Profitability (TOP 4) (in MNT billion) 45.9% 31.2% 29.6% 39.3% 58,379 51,122 29,914 12.% 12,192 4.% 2.8% 1.5% 2.3% 3.1% 27 28 29 21 211 Khan TDB Golomt XacBank ROAE ROAA One of the Highest ROE in the Region Strong ROA 37.7% 3.8% 2.83% 21.6% 2.5% 19.2% 16.3% 1.89% 1.61% 12.4% 11.2% 11.2% 11.1% Khan Indo China India MY Thai SG HK Korea Khan TDB XacBank Golomt
Banking Sector Development Adequately Capitalized CAR Khan Bank Loan Deposit Ratio Khan Bank 25.% 2.% 15.% 11.4% 12.4% CAR-Khan Bank 19.3% 16.6% 15.4% 12% 1% 8% 6% 98% 84% 68% 59% 76% 1.% 4% 5.% 2%.% 27 28 29 21 211 % 27 28 29 21 211 CAR of TOP 4 banks (YE 211) Loan Deposit Ratio of TOP 4 banks (YE211) 2.8% 116% 15.4% 13.3% 12.6% 62.4% 74% 68.1% XacBank Khan Golomt TDB XacBank TDB Khan Golomt Source: TDB & Golomt & XacBank Website, audited report
Capacity for Further Growth (Banking system) (in billion MNT) Total Banking Sector Loan to GDP 8 7 6 5 4 3 2 1 15% 79% 79% 84% 66% 27 28 29 21 211 Deposit Loan LDR 12% 1% 8% 6% 4% 2% % 1 8 6 4 2 27 28 29 21 211 Banking sector assets Banking sector loans /net/ Loan to GDP ratio 6% 5% 4% 3% 2% 1% % 211 Regional Loan Growth 211 Regional Deposit Growth 1% 45% 46,% 72% 9% 4% 8% 35% 7% 3% 6% 25% 5% 2% 4% 26.8% 3% 22.5% 15% 16.5% 2% 15.2% 14.4% 13.5% 13.1% 13.% 1% 1% 5% % % 25.2% 14.5% 14.3% 11.3% 11.% 9.% 7.2% 6.% Source: Bank of Mongolia, Deutsche bank
Challenges the Banking Sector is facing - Immediate: overheated economy(?) impact of global economic turbulence - Underdeveloped interbank market - Long term funding in MNT - Legal and regulatory framework e.g. movable assets pledge, non-banking finance business financial holding company - Capital needs - Risk management and system investment - Compliance, AML, KYC - Governance and transparency
Mongolia s banking sector has attractive opportunity
Case of Khan Bank Diversified Business Portfolio Khan Bank Loan Composition Khan Bank Income Composition Mortgage 13% Other 4% Corporate 23% 14 12 1 8 79 7 88 124 6 53 Retail 33% SME 27% 4 2 34 13.1 19.92 4.9 8.5 1.3 14.9 4.7.44 1.37 2.91 3.85 6.31 26 27 28 29 21 211 FX Income Fees & Other Income Net Interest Income
KHAN BANK-NATIONWIDE NETWORK 5 Branches in every part of Mongolia of which 8 are in urban areas and 42 are in rural areas Estimated that 8% of all Mongolian households utilize Khan Bank s services 1.6 million customers all over the country 299, borrowers of which 82% is retail consumer borrower. 26 ATMs 63% of national market penetration 1 million debit card holders 8
Bulgan Branch, Bulgan Aimag Mongolia
Thank you for your attention.