Development Bank of Mongolia LLC

DBM's credit costs could remain high in 2022, amid a focus on risk management and asset recovery, alongside a moderate economic recovery in Mongolia. We expect continued net losses, although the losses could be smaller than a year ago, depending on the outcome of the investigations and rate of recoveries. The losses would strain the bank's capitalization. However, we believe the government could provide capital support, if needed. The stable outlook on DBM reflects that on the sovereign credit rating on Mongolia. We equalize the ratings on DBM with those on the sovereign because we expect the bank to remain a government-related entity with an almost certain likelihood of receiving government support when needed, at least for the coming few

...Asset concentration and quality issues continue to weigh on profitability and capitalization, leading to a potential need for government support. An asset quality review by Bank of Mongolia (BOM) in late 2021 and ongoing investigations by the Mongolia's parliamentary oversight committee on the lending and risk management practices of Development Bank of Mongolia LLC (DBM) have highlighted the bank's weak risk management and asset quality woes. DBM historically had weaker asset quality metrics than the domestic banking industry average. This is owing to the bank's high single-name concentration and concentration on lending to export-related industries such as mining, agriculture, and transportation. This is in part due to its policy roles. DBM's credit costs could remain high in 2022, amid a focus on risk management and asset recovery, alongside a moderate economic recovery in Mongolia. We expect continued net losses, although the losses could be smaller than a year ago, depending on the...

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