banking industry 2012-iv_eng

7/29/2019 Banking Industry 2012-IV_ENG

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Banking industry

4th Quarter, 2012

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Table of content

Banking Industry.......................................................................................................................................2

Abstract......................................................................................................................................................2

Banking Sector Growth.......................................................................................................................3

Capital Growth .......................................................................................................................................3

Total Asset and Liability Structure .....................................................................................4

Total Deposit and Loan ....................................................................................................................5

Rural Banking Operation..................................................................................................................8

Continued Slowdown of Non-performing Loan.................................................................... 10

Increased Banking Competition ................................................................................................ 13

TABLE OF DIAGRAMS

Diagram 1. Structure of money supply(M2) 3

Diagram 2. Banks total asset and growth 4

Diagram 3. Structure of asset and liability in banking system 5

Diagram 4. Total deposit, its growth and structure 5

Diagram 5. Total loan outstanding and its growth 6

Diagram 6. Loan outstanding by economic sectors 7

Diagram 7. Deposit and loan dynamics of provinces 8Diagram 8. Quarterly deposit and loan outstanding index of provinces 8

Diagram 9. Dependence of deposits and loan of provinces 9

Diagram 10. Loan (quality) classification and volume in total loan 10

Diagram 11. Standard loan term structure 11

Diagram 12. Non-performing loan by economic sectors 12

Diagram 13. Dynamics of interest 13


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Banking industry

4th Quarter, 2012

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BANKING INDUSTRY

Abstract

The percentage of currency outside banks in money supplydecreases.

Reluctance in the growth of loan disbursed with the term of 5 ormore years in standard loan.

As of 4th quarter, 2012 the loan disbursed in the fields of(i)Education, (ii) Mining, (iii) Transportation and warehouses

peaks amongst total loan.

Higher fluttering on the provincial deposits and loanoutstanding due to seasonality.

Steady growth in the deposit and loan outstanding of South-Gobiand Dornogobi provinces in recent years.

1 Number of Non-bank financial institution 3th quarter, 20122 As of 2011, financial/insurance sectors GDP

Banking Markets, 4th quarter, 2012,

Number of banks/Non-bank financial institutions1 14/205

Financial/insurance sectors GDP (trillion /% of GDP)2 0.29/2.6

Total assets (trillion) 11.99

Total loan (trillion /% of GDP) 6.9/49.8

Total deposit (trillion /% of GDP) 4.4/31.4

Personal loans (trillion /% of GDP) 3.8/27.4

Mortgages (trillion /% of GDP) 0.9/6.6

SME loans (trillion /% of GDP) 1.2/8.5

The volume of non-performing loan in total loan 4.2

Deposit rate/loan rate 11.7/18.2

Number of branches in remote areas 1015

Number of ATMs 711

Number of card holders/active card holders (million) 2.7/1.1


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Banking industry

4th Quarter, 2012

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Banking Sector Growth

The money supply (M2) structure indicates that currency outside

banks accounted for 39% of total money supply in 1999; it fell down

to 7.9% in 2012. This is one of the indicators for the banking

sector growth in Mongolia.

Diagram 1. Money Supply (M2) Structure

The diagram demonstrates the increase in deposits and decrease in

current account balance in 2012 year over year. This reveals that

banks have better and more sustainable (source of) capital.

Moreover, the volume of foreign currency current accounts and

deposits in money supply increased in 2012.

Capital Growth

As of 4th quarter, 2012, the total asset of commercial banks

reaches MNT 11.99 trillion, up 28% year over year and 92% compared

to 2010 respectively.

Even though the total asset of banking sector has continuously

grown in the recent years, the annual growth rate flutters

frequently due to economic circumstance. Due to the world economic

and financial recession, the annual growth of total asset bottomed

out from 4th quarter, 2008 to 1.8% and 1.4% respectively in the 2nd

and 3d quarters of 2009.

Furthermore, from the 2nd quarter, 2010 the annual asset growth

continuously rose and topped at 55.6% in the 3rd quarter, 2011

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100% Current accoun in FC

Time deposits in FC

Corporation time deposit

in DC

Individuals time deposit inDC

Current account in DC

Currency outside banks

Current account in FCCurrent account in FC


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Banking industry

4th Quarter, 2012

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since the recession. Though, since then the topped growth of the

annual asset growth gradually declined to 28%, as of 2012.

Diagram 2. Banks Total Asset and Growth

Total Asset and Liability Structure

The total asset and liability structure is shown in diagram-3. As

of 4th quarter, 2012, 58% of the total asset of banking system is

comprised of the individuals and corporate debts while 17% as banks

reserves, 6% as Central Bank bills and 6% as foreign assetrespectively.

In contrast, of the total liabilities, deposit and current accounts

in foreign currency comprise 53% while local currency current

accounts as 18%, foreign liabilities as 12%, Government deposit as

8% and financial derivatives as 5% respectively as of 4th

quarter,2012.

9,371.63

11,992.23

0.28

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

-

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV

2006 2007 2008 2009 2010 2011 2012

Total asset, billion yearly growth of total asset


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Banking industry

4th Quarter, 2012

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Diagram-3. Asset and Liability Structure of Banking Sector

Total Deposit and Loan

The total deposit tends to grow; however, the annual growth rate

goes down from the 2nd quarter, 2011.

As of 4th quarter, 2012 the commercial banks deposits reach MNT

3.09 trillion, up 17% year over year.

Of the total deposit, demand deposits comprise 29% while the rest

of 71% by time deposits. While the deposit in domestic currency

reached 76% in the 4

th

quarter, 2011, it slightly goes down to 70%as of 4th quarter, 2012.

Diagram 3. Total Deposit, Growth and Structure

13% 6%

6%

58%

17%

Decomposition of assets,

2012Q4

Bank reserves

Central bank bills

Foreign assets

Claims on individuals

and nonfinancial

corporationOther asset

18%

53%

12%

8%

5% 4%

Decompostion of liabilities,

2012Q4

Current account in

DCTotal deposits and

current account in FCForeign liabilities

Government deposits

Financial derivativies

Other liabilities

-0.20

-0.10

-

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

-

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV

2005 2006 2007 2008 2009 2010 2011 2012

Time depositsDemand depositsDeposits, billion Growth of deposits, right axis


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Banking industry

4th Quarter, 2012

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As of 4th quarter, 2012, the total loan comprises 58% of total

asset. The total loan outstanding rises continuously, however its

speed slows down from 4th quarter, 2011.

As of 4th quarter, 2012, the total loan outstanding of commercial

banks of Mongolia increased to MNT 6.9trillion, up by 24% year over

year.

While the average growth rate of total loan outstanding for the

past one year was 38%, the monthly growth rate for April, 2012 was

24%.

Diagram 4. Total Debt Outstanding and Growth

The diagram-6 shows the total loan outstanding classified by

economic sectors. As of 4th quarter, 2012, the volume of loan

outstanding for whole sale and retail trade sector comprise the 16%

or tops than other sectors. In addition, the real estate, mining,

construction and processing industries are the major sectors that

account for over 10% of total loan outstanding.

There is an increase on the loan growth for those sectors

accounting for the larger volume of the total loan outstanding.Agriculture, the major sector of the economy of Mongolia accounts

for 2.5% of total loan outstanding.

-0.10

-

0.10

0.20

0.30

0.40

0.50

0.60

0.700.80

-

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.008,000.00

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV

2006 2007 2008 2009 2010 2011 2012

Loan outstanding, billion Yearly growth, right axis


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4th Quarter, 2012

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Diagram-6. Loan Outstanding by Economic Sector

From the diagram above, we can see as well the dropping trend of

2012 for the sectors such as finance, insurance, education, power

industry which account for small percent of total outstanding.

-300.00 700.00 1,700.00

Other

Professional, scientific and

Water supply; sewerage, waste

Electricity, gas, sream and air

Education

Information and communicationHuman health and social work

Financial and insurance activites

ccommodation and food service

Agriculture, forestry and fishing

Transportation and storage

Manufacturing

Mining and quarrying

Construction

Real estate activities

hole sale and retail trade; repair

2010-IV

2011-IV

2012-IV


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Banking industry

4th Quarter, 2012

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Rural Banking Operation

In general, the deposit and loan outstanding of provinces tend to

grow. As of 4th quarter, 2012, the total deposits of provinces

reach MNT786.3 billion or account for 18% of total deposits and the

total loan outstanding reaches MNT 1,540 billion or account for 22%

of total loan.

Diagram5. Deposit and Loan Dynamics of Provinces

Higher fluttering is felt on the provincial deposits and loan

outstanding due to seasonality. This is largely due to the seasonal

changes depending on which the

revenue and expenditure of

rural people of the country

change.

The trend is observed that

deposit balance of provinces

exceeds by MNT13.3 billion in

the 2nd quarter annually while

the loan outstanding declinesby MNT 12.4 billion.

The April, May and June are the

period of major source of

income for herders from the

cashmere.

0%

5%

10%

15%

20%

25%

-

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

I III I III I III I III I III I III

2007 2008 2009 2010 2011 2012

Local deposits

Rate of local deposits in total

deposits

0%

5%

10%

15%

20%

25%

30%

-

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

1,600.0

I III I III I III I III I III I III

2007 2008 2009 2010 2011 2012

Local loan

Rate of local loan in total loan

-15

-10

-5

0

5

10

15

20

25

1 2 3 4MNTBillio

n

Figure 6. Seasonal index of local

deposits and loan

Seasonal index of local deposits

Seasonal index of local loan


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Banking industry

4th Quarter, 2012

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In contrast, deposit balance of provinces soars by MNT9.9 billion

in the 3d quarter while the loan outstanding increases by MNT22.2

billion.

This is majorly due to the period when rural people tend to afford

for the tuition fee and educational costs of students for the city-

the largest ever expenditure for them.

Moreover, the deposit balance of province goes up in the 4th

quarter while the loan outstanding goes down.

As of 4th quarter, 2012, the provinces including Orhon, Darkhan-Uul

and South-Gobi etc topped with their deposit balance. Orhon,

Darkhan-Uul and Selenge provinces rank with their highest loan

outstanding.

In recent years, the intensive increase is felt in the deposit

balance and loan outstanding of South-Gobi and Dornogobi provinces.

Diagram-9. Dependence of Provincial Deposit and Loan

Gobi sumber

Umnugobi

Dornogobi

Selenge

Darhan-Uul

Orhon

-

30,000.0

60,000.0

90,000.0

120,000.0

- 20,000.0 40,000.0 60,000.0 80,000.0 100,000.0 120,000.0 140,000.0 160,000.0

Deposi

ts,

billion

Loan outstanding, billion

Correlation of local deposit and loan

Linear (Correlation of local deposit and loan)


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Banking industry

4th Quarter, 2012

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Continued Slowdown of Non-performing Loan

Diagram-10 demonstrates the dynamics of the loan (quality)

classification in banking sector since 2000.

Diagram-7. Loan Classification and Volume in Total Loan

In early quarter of 2000, the non-performing loan topped or

accounted for 30% of total loan. Since then due to the constant

decline, it leveled off from the 4th quarter, 2001 until the 3rd

quarter, 2008.

However, due to the financial recession started in 2008, the non-

performing loan portfolio of the banking system soared from the 4th

quarter, 2008 and peaked in 4th quarter, 2009 or reached 17% of

total loan.

The volume of non-performing loan in total loan declined to 6% in

2011, since then it tends to stabilize.

As of 4th quarter, 2012, the non-performing loan portfolio comprises

4% of total loan while 70% of total non-performing loan are

referred as bad loans.


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Banking industry

4th Quarter, 2012

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Diagram 8. Standard Loan Term Structure

The dynamics of standard loan term structure is shown on diagram -

11.

Until 2004, 90 percent of total standard loan was comprised of

short term loan /for the term up to 1 year/. However, starting from

2004, the volume of total standard loan with the term of up to 1-5

years increased constantly reaching 58% in the 4th quarter, 2012.

Since 2007, the standard loan with the term of over 5 years went up

accounting 22% of total standard loan in the 3d quarter, 2010.

However, since then no increase ever observed in the volume ofstandard loan with the term of over 5 years.

Only in the past year, the volume of standard loan with the term of

up to 1 year tends to go up.


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4th Quarter, 2012

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The diagram 12 indicates the volume of non-performing loan with its

respective percentage in the target sectors as of 4th quarters of

the past 3 years.

Diagram 9. Non-performing Loan by Economic Sectors

From the diagram, the sectors including (i) Education, (ii) Mining,

(iii) Transportation and warehouse top with their volume in total

loan as of 4th quarter, 2012.

- 0.10 0.20 0.30

Other

Human health and social

Adminisrative and

Real estate

accommodation and food

Informationa

Manufacturing

Professional, scientific

Wholesale and retail

Agriculture, forestry and

Construction

Financial and insurance

Electricity, gas, steam and

Water supply, sewerage,

Transportation and storage

Mining and quarrying

Education

2010-IV

2011-IV

2012-IV


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Banking industry

4th Quarter, 2012

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Increased Banking Competition

The diagram-13 illustrates the dynamics of weighted average rate

and spread of deposit and loan. In 2nd quarter, 2012 the spread

decreased from 7.6 unit increase to 6.5 unit increase in December,

2012.

The decline in spread reveals the increased competition of

commercial banks and improved market circumstance.

Diagram 10. Interest Dynamics

MONGOLIAN BANKERS ASSOCIATION

0

2

4

6

8

10

12

14

16

18

20

8

13

18

23

28

IIII

VVII

IX XI I

III

VVII

IXXI I

III

VVII

IX XI I

III

VVII

IXXI

2009 2010 2011 2012

,

Weighted average rate of loan

Weighted average rate of deposit

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