Mongol Bank updates on financial and banking operations

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- Foreign debt rises by 171 million USD -

Mongol Bank representatives held a press conference last Thursday to provide latest insights into Mongolia’s economic and financial situation, the central bank’s activities, and mortgage loan, amongst other issues.

Higher foreign currency accounts increase money supply

Money supply, or M2, reached 20.3 trillion MNT at the end of July, demonstrating a rise of 17.8 percent year-over-year and 0.3 percent from the previous month, reported B.Batdavaa, head of Research and Statistics Department of Mongol Bank.

He said, “This increase was attributed to the larger number of current accounts held in foreign currency. In other words, it shows that incomes in foreign currency of exporting companies have increased.”

On the other hand, deposits in tugrug current accounts decreased by 311.9 billion MNT in July and this is said to be connected to the tax payment of large enterprises.

The majority of the money supply was made up by savings accounts held in tugrug (53.7 percent), followed by current accounts held in tugrug (15.5 percent), savings accounts held in foreign currencies (14.4 percent), and savings accounts held in foreign currencies (13.2 percent).

B.Batdavaa reported that the total amount in savings reached 13.8 trillion MNT, 84.1 percent of which was made up by individual accounts and the rest by accounts of private enterprises. Meanwhile, 21.7 percent of savings accounts held in foreign currency were owned by private enterprises and 20.7 percent by individuals.

Outstanding loans

Outstanding loans jumped by 17 percent year-over-year to stand at 18.1 trillion MNT in July, the bank reported. Of this amount, outstanding loans to individuals took up 9.4 trillion MNT with annual growth of 22 percent, while outstanding loans to enterprises made up 8.7 trillion MNT with 12 percent annual growth. Loans in foreign currencies take up 13 percent of total loans.

A breakdown of total outstanding loans shows:

  • 23 percent is salary and pension loans
  • 16 percent is trade loan
  • 11 percent is loans in real estate
  • Nine percent is loans in the construction sector

While non-performing loans amount to 10.6 percent of all loans, overdue loans amount to 4.8 percent. Mongol Bank underlined that loans to private enterprises make up 73 percent of total overdue loans and 83 percent of non-performing loans.

Based on the economic structure of overdue loans, 25 percent belong to the construction sector, 19 percent to the insurance sector, 15 percent to the trade sector, and 13 percent are wage and pension loans. As for nonperforming loans, 24 percent belonged to mining, 21 percent to industry, and 11 percent to the construction sector.

741 receive mortgages

In July, new mortgage loans amounting to 57.1 billion MNT was issued to 741 people, according to Mongol Bank.

Of these issued mortgages, 45.5 percent was financed through the housing program and the rest with bank capitals and other sources. The average weighted interest rate for mortgage loans equaled 11.5 percent for the reference period, which is 0.6 percent lower compared to the same period of last year.

Out of the total outstanding mortgage loans, 74.4 percent was financed by the housing program, 21 percent by banks, and 4.6 percent was financed through other sources.

In August, the central bank, government and commercial banks issued 283 billion MNT in mortgage financing to around 4,000 loan applicants, according to Head of Reserves Management Department A.Enkhjin. This is 100 billion MNT higher than the amount issued last year.

Gold submission at risk of depreciation

During the press conference, central bank officials warned about risks of further decline in the gold collection.

“Currently, Mongol Bank has purchased 9.5 tons of gold from the local market. Compared to the same period of last year, the collection fell by 2.2 tons. This is connected to the higher royalty tax, which increased in January this year,” said A.Enkhjin. “Last year, the central bank bought 22 tons of gold. We’re working to maintain this amount this year but there’s a high risk that it will decrease.”

Inflation remains at 7.7%

Inflation reached 7.7 percent at the national level at the end of July, staying within the target range of eight percent, reported Head of Monetary Policy Department B.Bayardavaa. However, the inflation rate has been relatively high in the capital, raising concerns.

“Lately, the inflation rate in Ulaanbaatar has been coming out at nine percent. The main driver of this rise is the price of meat. Meat prices are causing 30 percent of the fluctuations in the inflation rate,” B.Bayardavaa said. “Changes in global fuel prices is also impacting local market prices and causing inflation. Over the last year or so, prices of coal and wood used in ger areas have been causing considerable inflation too. I think that inflation burdens will be relatively low this year thanks to the growing consumption of improved fuel.”

Mongol Bank expects the next major drive for inflation fluctuation to be vegetable prices as harvest season is approaching. However, unlike previous years, the inflation rate is expected to decline, which will help maintain the target eight percent rate for Mongolia through 2020.

Dulguun Bayarsaikhan