Non-performing loans grow 45 percent in one month
Commercial bank balance sheet data of October shows MNT 200 billion in losses
1 долоо хоног, 6 өдөр өмнө
Bank of Mongolia (BoM) recently reported the results of commercial bank balance sheet data for October 2018. Key highlight from the report was that the balance sheet resulted MNT 200 billion in loss in the first 10 months of this year.
Although the indicator was MNT 42 billion in surplus in September, the surplus shifted into a loss of MNT 240 billion within a month. As for the same period of last year, the balance sheet of domestic commercial banks was at MNT 220 billion in surplus.
Also, the amount of non-performing loans (NPL) reached MNT 1.9 trillion which is 11.9 percent of total gross loans. Total amount of NPL jumped by MNT 600 billion or 45 percent month over month.
Mongolian Bankers Association, in its February 2018 report, explained that the loss is related to the measures under the Asset Quality Review, which was organized within the frames of the International Monetary Fund (IMF) program.
At the completion of the sixth review under the Extended Fund Facility program, the IMF team warned, “The undercapitalized have until end-December to raise the necessary new capital and failure to do so will face Central Bank intervention or be resolved as per the Banking Law.” The BoM informed that the undercapitalized banks increased their assets by MNT 140 billion as of yesterday. Furthermore, a BoM spokesperson noted that 2-3 banks are currently in systematic risk.
Analysts highlighted the fact that the percentage of NPL to total gross loans entering double-digits means is an alarming signal for the financial system. Due to inflation reaching 7 percent in Ulaanbaatar city, NPL to total gross loans totalling 12 percent and rapid depreciation of MNT rate, the BoM raised the interest rate to 11 percent from 10. On the contrary, the Parliament approved the 2019 State Budget with MNT 11.6 trillion expenditure and MNT 2 trillion in deficit. Local media outlets are pointing out that this will further increase debt pressure starting from 2021 when sovereign bond repayments are due.