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- Country Name: Mongolia
- Assets: MNT 2,072,815,427
- Profits: MNT 12,208,034
- Ownership: 20% Mongolyn Alt (MAC) LLC,
19.171% International Finance Corporation,
15.541% ORIX Corporation,
11.634% European Bank for Reconstruction and Development,
10.150% Ronok Partners Company,
10.063% EIT Capital Management (ECM),
7.562% Mercy Corps,
3.730% Triodos Fair Share Fund,
1.593% Open Society Forum NGO,
0.301% Ulaanbaatar Rotary Club NGO,
0.102% Magvan Bold,
0.093% Chuluun Ganbold,
0.058% EIT LLC
- Date Modified: Jul-2015
Syndicated Analyses:Moody's Corporation "Moody's changes ratings outlooks of Mongolia banks to negative and affirms ratings" 08-Jan-2014:
Moody's change in the ratings outlooks to negative reflects the fact that the banks remain vulnerable to a deterioration in asset quality and high borrower concentration against the backdrop of intensifying adverse developments in the operating environment. 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 has affirmed XacBank's B1 local currency deposit ratings, and its bca remains at b1. The b1 reflects its (1) growing franchise and well-established expertise in micro-finance; (2) solid capitalization after a series of capital injections; and (3) conservative risk positioning, given its low credit concentration risk. The bank's local currency deposit rating does not incorporate uplift for systemic support because the sovereign rating for the Mongolian government is the same as the bank's standalone rating of B1. However, we believe that there is a high probability that the bank will receive support, in case of need, because of its importance to the domestic economy.Reuters "Fitch Affirms Mongolia's XacBank at 'B', Outlook Negative" 16-Dec-2014:
The VR-driven IDR of the bank captures the weakening operating environment in Mongolia. This contributed to a spike in impaired loans in 2014 following the bank's shift towards SME lending, which now account for more than half of its loans, from microfinance operations.
The ratings also capture the bank's satisfactory deposit franchise and stable access to foreign-currency funding from multinational and bilateral institutions. Diversified ownership and involvement of international shareholders in the bank's management underpin a reasonable degree of corporate governance. XacBank's Outlook remains Negative as Fitch considers it possible that XacBank's loan quality will continue to worsen as the weakening local currency lowers the capacity of borrowers to repay their foreign-currency loans.
The Support Rating (SR) and SRF of the bank reflect Fitch's view that sovereign support, although possible, cannot be relied upon. Although Fitch believes the government is willing to support systemically important banks, its ability to do so remains limited.Moody's Corporation "Moody's downgrades XacBank; lowers BCA to b3" 30-Oct-2014:
Moody's Investors Service has downgraded XacBank LLC's issuer rating to B3 from B2 and its foreign currency long-term senior unsecured MTN rating to (P)B3 from (P)B2.
The action on XacBank's ratings reflects the fact that the bank's asset quality continues to deteriorate against the backdrop of adverse developments in its operating environment
Moody's considers that XacBank's asset quality has been impacted more than that at other rated Mongolian banks because of its problem loans in the large corporates segment -- disbursed in 2012 and 2013 -- and in the small- and medium-sized enterprises (SMEs) segment. Secondly, with liquidity, Moody's notes that such conditions have tightened as a result of the hike in BOM's policy rate by 150basis point to 12% and the unwinding of the pump-priming measures.
In terms of XacBank's strengths, Moody's identifies: (1) its growing franchise as the fourth-largest commercial bank in Mongolia and as the leader in retail and SME lending; (2) its solid and stable capital position, owing to supportive international shareholders; and (3) its transparent level of corporate governance, as supported by its international shareholders, such as the International Finance Corp and European Bank of Reconstruction and Development. However, the adverse developments in the operating environment and the increased level of concentration risk -- because of its rising share of corporate and SME customers -- challenge these strengths. Moody's notes that XacBank's share of corporate and SME customers rose significantly to 67% of all its customers at end-2013 from 58% at end-2011. As a result, its non-performing loans ratio rose to 3.8% at end-June 2014 from 1.3% a year ago.
Moody's believes that the availability of stable relatively long-term wholesale funding from its shareholders means that the bank could be more resilient than its peers in the event of a run on deposits.Wikileaks Public Library of US Diplomacy "Post's Response Re Investment Guaranty To Calvert Social Investment Foundation For Mongolian Microfinance Institutions Khan Bank And Khas (Xac) Bank" 01-Aug-2007:
Post has the following response to OPIC's request for background information regarding the two possible Mongolian microfinance institutions (MFI) Khan bank and Khas (hereafter using local spelling "Xac", but pronounced "khas") bank. First, to post's knowledge neither Khan Bank nor Xac bank has any ties to terrorism, money laundering, corruption, and violations of Mongolian or U.S. law. 2. (SBU) Both institutions have long and deep ties with the U.S Government.
Xac Bank was once two separate institutions, the UNDP-funded Micro-Start Mongolia (MSM) and the USAID-funded Goviin Ekhlel, both organizations were specifically created with micro-finance in mind. Although funded by the UNDP, MSM was essentially privatized to a group of Mongolian NGO's who became shareholders and served as MSM's board of directors, under the supervision of western experts. As both organizations were dedicated to micro-finance, it was argued that better results for shareholders and services for clients were more likely to be obtained if the two banks combined their resources and ceased competing for essentially the same customer base. 5. (SBU) Currently Xac Bank maintains a 66 branch network covering all of Mongolia's aimags (provinces), employing some 840 staff. At the end of the 1st quarter 2007, total loans amounted to nearly US$56 million in loans to some 60,000 borrowers. Total deposits reached US$41 million among 154,000 savings and current account holders. Foreign investors own 55% of the bank and include Mercy Corps, a US-based charity, Micro Vest, ShorCap, and Triodos. Moody's rated Xac Bank "Ba2" with a "stable outlook" for long and short term deposits in both foreign and local currencies.