Trade and Development Bank of Mongolia LLC

The stable outlook on TDB reflects our view that the bank is likely to maintain its solid market position in Mongolia and current level of capitalization over the next 12-18 months. We expect TDB's profitability to remain moderate during the period due to an increase in credit costs as loan forbearance measures related to COVID-19 unwind and higher regulatory capital ratio requirements limit the bank's asset growth. The outlook on TDB also reflects the outlook on the sovereign credit rating on Mongolia. We could lower the rating on TDB if we downgrade Mongolia because the rating on the bank is constrained by the sovereign rating. We could also lower the ratings on TDB if the bank's asset quality deteriorates significantly

...Trade and Development Bank of Mongolia LLC (TDB)'s profitability will remain under pressure for at least the next 12 months. We expect Mongolia's economy to recover from the impact of the COVID-19 pandemic in 2021. However, operating conditions for banks, including TDB, are likely to remain volatile because loan relief measures related to COVID-19 have allowed banks to delay bad-debt recognition and provision build-up. As these measures will likely unwind in the next 12 months, we anticipate credit costs will be elevated while net interest margins will remain broadly stable. TDB's asset quality will remain vulnerable due to its loan concentration in cyclical sectors. The bank faces the inherent credit risk emanating from its high concentration to the corporate sector in its loan portfolio. This risk is heightened by TDB's concentration in the mining, wholesale and retail trading, and construction industries, which accounted for about 50% of the bank's loan portfolio as of end-2020. TDB's...

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