Trade and Development Bank of Mongolia LLC

The stable outlook on TDB reflects our view that the bank is likely to maintain its market position in Mongolia and capitalization over the next 12-18 months. We expect TDB's profitability to remain weak during the period. This is 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 ratings on TDB if we downgrade Mongolia because the ratings on the bank are effectively constrained by the sovereign rating. We could also lower the ratings on TDB if the bank's asset quality deteriorates significantly below

...Trade and Development Bank of Mongolia LLC (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 in the corporate sector in its loan portfolio. Heightening this risk is TDB's concentration in the mining, wholesale and retail trading, and construction sectors, which accounted for about 50% of TDB's loan portfolio as of end-2021. TDB's profitability will remain under pressure for at least the next 12 months after rebounding in 2021. Contrary to 2021, when the bank's overall profitability primarily improved owing to net reversals for provisions, we anticipate credit costs will remain elevated as loan relief measures related to COVID-19 unwind. Most of these measures ended on March 31, 2022, except the moratoriums on mortgage loans, which continue until year-end 2022. Higher regulatory capital ratio requirements will limit the bank's credit growth, in turn constraining revenue...

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