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Moody's confirms ratings of 8 Mongolian banks

Moody's confirmed the ratings of eight Mongolian banks following taking a similar action on Mongolia's sovereign issuer ratings.

The rating agency confirmed the Caa1 long-term local-currency deposit ratings of Bogd Bank LLC, Capital Bank LLC, Golomt Bank LLC, Khan Bank LLC, State Bank LLC, Trade & Development Bank of Mongolia LLC, and XacBank LLC. Meanwhile, Development Bank of Mongolia's foreign-currency issuer rating was confirmed at Caa1.

The rating agency said March 31 that it upgraded Development Bank of Mongolia's baseline credit assessment to "caa2" from "ca".

The ratings action concludes the ratings review for downgrade Moody's initiated Feb. 16. The outlook is stable for all ratings.

Moody's said the ratings action reflects its assessment that the banks' operations are tied to the creditworthiness of the sovereign given their concentration of operations in the country and their significant exposures to sovereign debt.

Development Bank of Mongolia's baseline credit assessment was upgraded to reflect the easing of liquidity pressures following the exchange of and repayment of bonds that matured in March. The government had exchanged US$580 million worth of Development Bank of Mongolia notes for new government seven-year notes ahead of the March 21 maturity.

Moody's may downgrade the "caa1" baseline credit assessments of Bogd Bank, Capital Bank, Golomt Bank, Khan Bank, State Bank, Trade & Development Bank of Mongolia and XacBank if their asset quality or profitability deteriorates or if their tangible common equity falls below 8%.

Moody's may upgrade Development Bank of Mongolia's baseline credit assessment if the bank shows capitalization and liquidity levels consistent with its rating upon completion of a planned banking sector audit. On the other hand, the bank's rating may be downgraded if there is a downgrade of Mongolia's sovereign rating or if there is a large increase in losses without a corresponding increase in capital.