Moody’s Warns on Mongolia’s Banks

An aerial view of traditional Mongolian tents, or ghers, that will house workers at Mongolia’s Oyu Tolgoi copper and gold deposit.
Moody's Investors ServiceMCO -4.93% has placed negative outlooks on three Mongolian banks, citing risks from rising bad loans, slower economic growth and a deteriorating operating environment.
Moody’s changed its outlook to negative from stable on Khan Bank LLC, Trade, Development Bank of Mongolia LLC and XacBank LLC while reaffirming the three lenders’ B1 ratings.
The warning on Mongolia’s banking sector follows similar views from other ratings firms, who have noted that lenders in the resource-rich country are vulnerable to an economic slowdown after a period of rapid loan growth.
Because around 90% of Mongolia’s revenues come from mining-product exports, falling commodity prices have hurt growth and the nation’s balance of payments.
“Given the resource-based nature of the economy and a large lending concentration in mining, there is the risk of boom-bust cycles, resulting in a volatile operating environment,” Moody’s said in its assessment.
The credit firm noted that loan growth from January to November 2013 was 55%, much higher than the 23% growth of a year earlier. The nonperforming-loan ratio rose to 5.3% from 4.2%, still not as high as it might be given the pace of lending. But Moody’s noted that the bulk of loan growth was concentrated in the construction sector.
If those loans sour, capital raisings by the banks may be needed.
“The effects of the strong loan growth for 2013 are likely to offset the strong internal capital generated by reported earnings,” Moody’s said. “Therefore, despite an annualized average 26% return on equity before tax over the first nine months of 2013, the banks will need additional capital from external sources to support growth and maintain capital ratios.”
The downbeat assessment comes despite Mongolia’s authorities having projected a bumper year for the economy, led by foreign investment and an expected agreement with the country’s international partner to launch phase II development at the Oyu Tolgoi copper and gold mine, a $6.5 billion project that is projected to eventually account for a large chunk of the country’s gross domestic product. Central bank head Naidansuren Zoljargal said in November that GDP could expand as much as 17% next year from around 11% this year.
Meantime, Mongolia is drawing criticism for its treatment of foreign business executives in the country. In December, authorities moved to block a consultant to Standard Bank Group Ltd. from leaving in a dispute over loan repayment. They eventually allowed him to depart shortly before Christmas.
Around 20 foreign executives are estimated to have been barred from leaving Mongolia over the past two years.

Source:Wall Street Journal


Post a Comment

Facebook page

Powered by Blogger.


Advertising in Mongolia An Culture Editorial of the Mongolianviews education Environmental protection Famous Mongolians Foreigners in Mongolia Inner Mongolia Ivanhoe Mines Mongolia agriculture Mongolia analysis Mongolia and Australia Mongolia and Belorussia Mongolia and Cambodia Mongolia and Canada Mongolia and central Asia Mongolia and China Mongolia and Cuba Mongolia and EU Mongolia and Germany Mongolia and Hongkong Mongolia and Hungary Mongolia and India Mongolia and Inner Mongolia Mongolia and Iran Mongolia and Israel Mongolia and Italy Mongolia and Japan Mongolia and Kazakhstan Mongolia and Korea Mongolia and Kuwait Mongolia and Kyrgyzstan Mongolia and Malaysia Mongolia and Nato Mongolia and North Korean Mongolia and Poland Mongolia and Russia Mongolia and Singapore Mongolia and South Korea Mongolia and Taiwan Mongolia and the world Mongolia and Tibet Mongolia and Turkey Mongolia and UK Mongolia and Ukraine Mongolia and UN Mongolia and US Mongolia and USA Mongolia and Vietnam Mongolia Banking Mongolia civic society Mongolia crime Mongolia diplomacy Mongolia Economy Mongolia Education Mongolia Energy Mongolia Finance Mongolia Health Mongolia History Mongolia holiday Mongolia in international media Mongolia Industries Mongolia Joke Mongolia law Mongolia LGBT Mongolia medical Mongolia military Mongolia Mining Mongolia Mining Developments Mongolia Mortgage Mongolia natural disaster Mongolia Petroleum Mongolia public announcements Mongolia railways Mongolia Religion Mongolia society Mongolia Sports Mongolia Stamp Mongolia telecommunication Mongolia tourism Mongolia Urbanization Mongolia Wild Life Mongolian Agriculture Mongolian Archeology Mongolian Food Mongolian Gay Mongolian Government news Mongolian History Mongolian Military Mongolian Mining Development Mongolian Movie Mongolian News Mongolian Parliament Mongolian Political news Mongolian Press Mongolian Songs Mongolian Women Mongolian Youth Mongolians abroad Moninfo Opinion Oyu Tolgoi Investment Agreement Photo news Press Release Rio Tinto Tavan Tolgoi coal mine Ulaanbaatar development Weird expatriates in Mongolia

Blog Archive