Hong Kong, June 28, 2018 -- Moody's Investors Service, ("Moody's") has
today assigned Counterparty Risk Ratings (CRRs) to 9 banks in Mongolia.
The 9 banks affected are: 1) Bogd Bank LLC (Bogd Bank), 2)
Capital Bank LLC (Capital Bank), 3) Development Bank of Mongolia
LLC (DBM), 4) Golomt Bank LLC (Golomt Bank), 5) Khan Bank
LLC (Khan Bank), 6) State Bank LLC (State Bank), 7) Trade
and Development Bank of Mongolia LLC (TDBM), 8) Transport and Development
Bank LLC (TransBank), and 9) XacBank LLC (XacBank).
Moody's Counterparty Risk Ratings are opinions of the ability of
entities to honour the uncollateralized portion of non-debt counterparty
financial liabilities (CRR liabilities) and also reflect the expected
financial losses in the event such liabilities are not honoured.
CRR liabilities typically relate to transactions with unrelated parties.
Examples of CRR liabilities include the uncollateralized portion of payables
arising from derivatives transactions and the uncollateralized portion
of liabilities under sale and repurchase agreements. CRRs are not
applicable to funding commitments or other obligations associated with
covered bonds, letters of credit, guarantees, servicer
and trustee obligations, and other similar obligations that arise
from a bank performing its essential operating functions.
At the same time, Moody's downgraded the Counterparty Risk
Assessment (CR Assessment) of DBM to B3(cr) from B2(cr) to be consistent
with the government support notching guidance per the Banks methodology.
RATINGS RATIONALE
The CRRs assigned to the 9 Mongolian banks are in line with the CR Assessment
assigned.
Because Moody's considers that Mongolia does not have an operational
resolution regime, in assigning CRRs to the Mongolian banks subject
to this rating action, the rating agency applies its basic Loss
Given Failure (LGF) approach. Moody's basic LGF analysis
positions CRRs in line with the banks' CR Assessment, one
notch above their adjusted BCAs.
None of the 9 Mongolian Banks' CRR incorporate any uplift from government
support.
OUTLOOK
CRRs do not carry outlooks.
FACTORS THAT COULD LEAD TO AN UPGRADE/DOWNGRADE
Bogd Bank LLC -- WHAT COULD CHANGE THE RATING UP
Bogd Bank's b3 baseline credit assessment (BCA) is at the same level as
Mongolia's sovereign rating, and, as such, a positive
rating action is unlikely in the absence of an upgrade of the sovereign
rating.
Bogd Bank LLC -- WHAT COULD CHANGE THE RATING DOWN
Factors that could result in a downgrade include (1) a downgrade of Mongolia's
sovereign rating, or (2) a downgrade of the bank's BCA.
Bogd Bank's BCA could be downgraded if the bank's (1) asset quality deteriorates
significantly (for example, with problem loans/gross loans exceeding
9% on a sustained basis); (2) tangible common equity falls
below 8%; or (3) profitability deteriorates significantly,
leading to annual net losses on a sustained basis.
Capital Bank LLC -- WHAT COULD CHANGE THE RATING UP
We will upgrade Capital Bank's BCA and long-term ratings if the
asset-quality review (AQR) and additional funding from an international
fund result in asset quality and capitalization levels consistent with
a BCA of b3.
Capital Bank LLC -- WHAT COULD CHANGE THE RATING DOWN
The outlook on Capital Bank's domestic currency long-term rating
could be changed to stable from positive if the bank is unable to secure
additional capital to improve its capitalization. Factors that
could result in a downgrade include (1) a downgrade of Mongolia's sovereign
rating, and (2) a downgrade of the bank's BCA.
The bank's BCA could be downgraded if its (1) asset quality deteriorates
significantly, for example, with problem loans/gross loans
exceeding 9.0% for a sustained period; (2) tangible
common equity falls below 8.0%; or (3) profitability
deteriorates significantly, leading to annual net losses on a sustained
basis.
Development Bank of Mongolia LLC -- WHAT COULD CHANGE THE RATING
UP
DBM's long-term rating incorporates a one-notch uplift from
its BCA and is at the same level as the sovereign rating. A positive
rating action is unlikely in the absence of an upgrade of Mongolia's sovereign
rating.
We will consider upgrading DBM's BCA if the bank's asset quality
and profitability improve to levels consistent with a BCA of b3 while
maintaining sound capitalization.
Development Bank of Mongolia LLC -- WHAT COULD CHANGE THE RATING
DOWN
Factors that could result in a downgrade include (1) a downgrade of Mongolia's
sovereign rating; or (2) a weakening in the strategic importance
of DBM to the government, as a result of which we would change our
assessment of government support.
Golomt Bank LLC -- WHAT COULD CHANGE THE RATING UP
Golomt Bank's b3 BCA is at the same level as Mongolia's sovereign rating
and, as such, a positive rating action is unlikely in the
absence of an upgrade of the sovereign rating.
Golomt Bank LLC -- WHAT COULD CHANGE THE RATING DOWN
Factors that could result in a downgrade include (1) a downgrade of Mongolia's
sovereign rating, or (2) a downgrade of the bank's BCA.
Golomt Bank's BCA could be downgraded if the bank's (1) asset quality
deteriorates significantly with its problem loans/gross loans exceeding
9% on a sustained basis; (2) tangible common equity ratio
falls below 8%; or (3) profitability deteriorates significantly,
leading to annual net losses on a sustained basis.
Khan Bank LLC -- WHAT COULD CHANGE THE RATING UP
Khan Bank's b3 BCA is at the same level as Mongolia's sovereign rating,
and as such, a positive rating action is unlikely in the absence
of an upgrade of the sovereign rating.
Khan Bank LLC -- WHAT COULD CHANGE THE RATING DOWN
Factors that could result in a downgrade include a downgrade of (1) Mongolia's
sovereign rating; or (2) the bank's BCA.
The bank's BCA could be downgraded if its (1) asset quality deteriorates
significantly (for example, if problem loans/gross loans exceeds
9% for a sustained period); (2) tangible common equity falls
below 8%; or (3) profitability deteriorates significantly,
leading to sustained annual net losses.
State Bank LLC -- WHAT COULD CHANGE THE RATING UP
State Bank's b3 BCA is at the same level as Mongolia's sovereign rating,
and, as such, a positive rating action is unlikely in the
absence of an upgrade of the sovereign rating.
State Bank LLC -- WHAT COULD CHANGE THE RATING DOWN
Factors that could result in a downgrade include (1) a downgrade of Mongolia's
sovereign rating; or (2) a downgrade of the bank's BCA.
State Bank's BCA could be downgraded if the bank's (1) asset quality deteriorates
significantly, for example, with problem loans/gross loans
exceeding 9% on a sustained basis; (2) tangible common equity
falls below 8%; or (3) profitability deteriorates significantly,
leading to annual net losses on a sustained basis.
Trade and Development Bank of Mongolia LLC -- WHAT COULD CHANGE THE
RATING UP
TDBM's b3 BCA is at the same level as Mongolia's sovereign rating,
and, as such, a positive rating action is unlikely in the
absence of an upgrade of the sovereign rating.
Trade and Development Bank of Mongolia LLC -- WHAT COULD CHANGE THE
RATING DOWN
Factors that could result in a downgrade include (1) a downgrade of Mongolia's
sovereign rating, or (2) a downgrade of the bank's BCA.
TDBM's BCA could be downgraded if the bank's (1) asset quality deteriorates
significantly (for example, if problem loans/gross loans exceeds
9% on a sustained basis); (2) tangible common equity ratio
falls below 8%; or (3) profitability deteriorates significantly,
leading to annual net losses on a sustained basis.
Transport and Development Bank LLC -- WHAT COULD CHANGE THE RATING
UP
TransBank's b3 BCA is at the same level as Mongolia's sovereign rating,
and, as such, a positive rating action is unlikely in the
absence of an upgrade of the sovereign rating.
Transport and Development Bank LLC -- WHAT COULD CHANGE THE RATING
DOWN
Factors that could result in a downgrade include: (1) a downgrade
of Mongolia's sovereign rating, or (2) a downgrade of the bank's
BCA.
TransBank's BCA could be downgraded if the bank's: (1) tangible
common equity falls below 8%; (2) profitability deteriorates
significantly, leading to annual net losses on a sustained basis;
or (3) asset quality deteriorates, with its problem loans ratio
rising above 9%.
XacBank LLC -- WHAT COULD CHANGE THE RATING UP
XacBank's b3 BCA is at the same level as Mongolia's sovereign rating and,
as such, a positive rating action is unlikely in the absence of
an upgrade of the sovereign rating.
XacBank LLC -- WHAT COULD CHANGE THE RATING DOWN
Factors that could result in a downgrade include (1) a downgrade of Mongolia's
sovereign rating, or (2) a downgrade of the bank's BCA.
XacBank's BCA could be downgraded if the bank's (1) asset quality deteriorates
significantly, for example, with problem loans/gross loans
exceeding 9% on a sustained basis; (2) tangible common equity
falls below 8%; or (3) profitability deteriorates significantly,
leading to annual net losses on a sustained basis.
The principal methodology used in these ratings was Banks published in
June 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
All entities are headquartered in Ulaanbaatar.
Bogd Bank LLC reported total assets of MNT74.4 billion ($30.6
million) as of 31 December 2017.
Capital Bank LLC reported total assets of MNT745.6 billion ($374.1
million) as of 31 December 2015.
Development Bank of Mongolia LLC reported total assets of MNT3.74
trillion ($1.54 billion) as of 31 December 2017.
Golomt Bank LLC reported total assets of MNT5.21 trillion ($2.14
billion) as of 31 December 2017.
Khan Bank LLC reported total assets of MNT7.27 trillion ($2.99
billion) as of 31 December 2017.
State Bank LLC reported total assets of MNT2.34 trillion ($962.5
million) as of 31 December 2017.
Trade and Development Bank of Mongolia LLC reported total assets of MNT6.87
trillion ($2.83 billion) as of 31 December 2017.
Transport and Development Bank LLC reported total assets of MNT203 billion
($84 million) as of 31 December 2017.
XacBank LLC reported total assets of MNT3.04 trillion ($1.25
billion) as of 31 December 2017.
LIST OF AFFECTED RATINGS
Bogd Bank LLC
Assigned local and foreign currency long-term Counterparty Risk
Ratings of B2
Assigned local and foreign currency short-term Counterparty Risk
Ratings of NP
Capital Bank LLC
Assigned local and foreign currency long-term Counterparty Risk
Ratings of B3
Assigned local and foreign currency short-term Counterparty Risk
Ratings of NP
Development Bank of Mongolia LLC
Long-term Counterparty Risk Assessment downgraded to B3(cr) from
B2(cr)
Assigned local and foreign currency long-term Counterparty Risk
Ratings of B3
Assigned local and foreign currency short-term Counterparty Risk
Ratings of NP
Golomt Bank LLC
Assigned local and foreign currency long-term Counterparty Risk
Ratings of B2
Assigned local and foreign currency short-term Counterparty Risk
Ratings of NP
Khan Bank LLC
Assigned local and foreign currency long-term Counterparty Risk
Ratings of B2
Assigned local and foreign currency short-term Counterparty Risk
Ratings of NP
State Bank LLC
Assigned local and foreign currency long-term Counterparty Risk
Ratings of B2
Assigned local and foreign currency short-term Counterparty Risk
Ratings of NP
Trade and Development Bank of Mongolia LLC
Assigned local and foreign currency long-term Counterparty Risk
Ratings of B2
Assigned local and foreign currency short-term Counterparty Risk
Ratings of NP
Transport and Development Bank LLC
Assigned local and foreign currency long-term Counterparty Risk
Ratings of B2
Assigned local and foreign currency short-term Counterparty Risk
Ratings of NP
XacBank LLC
Assigned local and foreign currency long-term Counterparty Risk
Ratings of B2
Assigned local and foreign currency short-term Counterparty Risk
Ratings of NP
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Tae Jong Ok
Analyst
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Minyan Liu
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077