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Best domestic bank: Khan Bank
It would be hard to find a part of this vast frontier state that isn’t served by Khan Bank. The former agricultural lender is the country’s best and most-rounded financial institution by a long shot.
About 2.4 million of Mongolia’s 3.1 million people bank with Khan; chief executive John Bell reckons 5,000 new accounts are opened each month, of which 40% are done by parents seeking to set a new-born on the right financial path.
Over three-quarters of all ATM transactions in the country are processed by Khan, which employs 6,000 staff across 536 branches and offices, serving more than 70% of the country’s households.
It stands head and shoulders above its peers both in terms of scale (Khan had assets of $3.35 billion at the end of September 2018, up 16% from a year earlier) and its income-generating capacity (the bank reported a net profit of $64 million in the third quarter of 2018, up 63% from a year earlier).
But two often-overlooked attributes really catch the eye. The first is its all-round prowess: as well as being Mongolia’s biggest retail lender, Khan offers an impressive range of services for its wealthy clientele and at small and medium-sized firms. In September 2018, it secured a $120 million loan from Dutch development bank FMO to fund SMEs in remote spots.
And the second is Khan Bank’s laudable willingness not to rest on its laurels. Its reaction to the threat of disruptive new digital lenders has been to lean in.
Khan is pouring money into digital banking, ensuring that its mobile banking app is, says Bell, on “virtually every smartphone in Mongolia”, and that it’s as strong online as it is offline, with more than 80% of all domestic internet transactions processed by Khan.
Best corporate and investment bank: Golomt Bank
Mongolia’s big financial institutions are defined almost by design. All are full-service lenders, but while Khan Bank specializes in retail lending and XacBank in serving SMEs, two other outfits – Golomt Bank and Trade and Development Bank of Mongolia – lavish their attention on Mongolia’s big corporates.
Of the pair, Golomt has the edge over TDB this year. The bank reckons it serves more than 80% of Mongolia’s large companies, many of which are all-purpose conglomerates, with interests ranging from telecoms and food production to construction and mining.
Founded in 1995, Golomt has consistently maintained its status as a stable lender of considerable systemic value to the frontier state. Its business is split evenly, with corporate clients making up 49% of its total loan book, while SME and retail clients making up the remainder.
The Ulaan Baatar-based outfit, a top-three lender in terms of total assets, net loans and total deposits, reported net interest income of $47 million in the full year 2017, up 43% from 2016. Total assets increased 12% on an annualized basis in 2017 over 2016, to a little over $2 billion.
But what makes Golomt Bank really stand out, beyond its dominance in corporate banking, is its desire to improve itself from within.
Allegations of unreported loans and hidden defaults in 2014 led to a period of introspection, and Golomt has emerged a better bank; it is currently working with the IFC, the private sector arm of the World Bank, to further strengthen its corporate governance.
“In terms of governance, it is much improved, and is actually better than its rivals,” says the chief executive of a rival lender.
Best private bank: Trade and Development Bank of Mongolia
A decade ago, private banking was all but unknown in Mongolia. Now, virtually every bank has at least one gleaming office in the capital, dedicated purely to serving the wealthy and their dependants. Golomt Bank offers an expanding repertoire of private banking services, as does the country’s biggest lender, Khan Bank, whose Priority and Signature services, launched in 2010, cater to more than 35,000 customers.
But TDB, one of Mongolia’s oldest lenders, again walks away with this award. Over the last year, it has opened up two new VIP branches – in the new Shangri-La Mall in central Ulaan Baatar, and in River Garden, an upscale neighbourhood to the south of the city – just as Randolph Koppa, executive vice-chairman and president promised last year.
The first onshore lender to offer proto-private banking services in 2004, TDB has more than 20% of the market, serving 330 individuals and families with personal assets of more than $200,000.
Even its peers acknowledge the bank’s pre-eminence. Notes the chief executive of another first-tier lender: “I’d like to nominate us for this award, but TDB is better than us.”
Each year the bank, under the stewardship of chief executive O. Orkhon and executive vice-chairman Randolph Koppa, finds new ways to innovate, hosting regular invitation-only events that deliver wealth management and risk management lessons to its loyal core of high and ultra-high net-worth individuals.
Private banking is never going to be big business here in absolute terms, but with the economy ticking along nicely in the wake of the IMF-led bailout in 2017, and with new entrepreneurs emerging to disrupt industries from banking to logistics and transport, it is certainly profitable and worth fighting over. And no lender is better at what it does than TDB.
Best digital bank: Khan Bank
Digital banking has been a big hit in this big country that has barebones infrastructure and a high level of smartphone penetration. A decade ago, most bank transactions were done in the branch; now, that share is below 10% and falling. Disruptive fintech firms are pushing into the sector, forcing traditional banks to up their game.
No institution has done a better job of this than Khan Bank. Mongolia’s largest lender by assets and customers began its push into the digital world in 2013, rolling out internet and mobile banking services. Each year, it innovates a little more; over the last year it has introduced Qpay, a QR code payment service that incorporates facial recognition and fingerprint-based log-in and e-billing. More than 80% of all domestic digital transactions are processed by Khan Bank.
Chief executive John Bell certainly talks the talk on digital, pointing to a recent upgrade of Khan’s mobile banking app and plans to move to an omni-channel platform in 2019 with Infosys. A digital campaign, branded ‘Live more, go digital’, echoes the ‘Live more, bank less’ tagline championed by Singapore’s DBS, probably the world’s best digital lender.
But Bell, a Chicago native who joined Khan in 2016 after stints at Citi and ABN Amro, recognizes the value of hiring digital talent from beyond Mongolia’s borders. In March 2018, Pankaj Patel, a former head of technology at ANZ in Singapore, joined as chief information officer, overseeing the full gamut of digital launches, tweaks and upgrades.
In the long term, Bell’s aim is to push Khan further out of its comfort zone, transforming it into “the most customer-centric organization in Mongolia”, capable of delivering everything from banking services to takeaway pizza to home furnishings.
Best bank for SMEs: XacBank
Founded in 2001 and partly owned by the International Finance Corporation and the European Bank for Reconstruction and Development, XacBank has always been the go-to bank in Mongolia for small and medium-sized enterprises.
It remains the leader in its field, and a worthy winner of this award, banking just shy of 25% of all domestic SMEs via 86 branches dotted around the country.
Over the last 18 months, Xac, under chief executive Bold Magvan, has secured $169 million in fresh funding from the IFC and the US-led Overseas Private Investment Corporation, in part to support women-owned businesses. The bank has disbursed $17.4 million worth of loans to female entrepreneurs at low rates of interest. Two thirds of all small firms are owned and run by women, according to the central bank.
Another consistent focus is on supporting green businesses in a country whose big cities are often shrouded in winter by choking smog.
The bank held its inaugural Green Financing Forum in late 2017, and has secured $20 million from the South Korea-based Green Climate Fund to fund small firms that install and produce energy-efficient goods and technologies. In December 2017, XacBank signed a $40 million syndicated loan with the EBRD to support micro-sized SMEs, while continuing to work with Japan’s JICA to channel business development loans ranging from $10,000 to $40,000 to local corporates.
XacBank has its work cut out to remain ahead of the pack. Khan Bank aims to boost its share of the SME market from 17% in late 2017 to closer to 25% in 2019, while second-tier lender TransBank, under new and ambitious management, has its sights set on being a leader in SME lending too.
Best bank for CSR: Arig Bank
Corporate social responsibility permeates everything Arig does. It is a stable and high-quality institution with roots that date back to 1997, making it one of the country’s oldest lenders, and with branches dotted around the big cities. But it is in the world of CSR that Arig really shines.
Acting chief executive Naranbaatar Radnaa sits on the steering committee of the Mongolian Sustainable Finance Association, a non-profit formed in January 2018 that aims to channel more capital into sustainable firms and projects.
Beyond Arig’s laudable approach to everyday sustainability (it recycles almost everything it consumes, from plastic bottles to the clothing worn by its staff) and its commitment to combating Ulaan Baatar’s woeful air pollution, what stands out is the bank’s proactive approach to improving financial literacy. It runs training programmes on consecutive Saturdays between January 1 and October 31.
Aimed at the young but catering to people of all ages, the weekly sessions offer basic advice (such as how to map out a weekly household budget or open a savings account) right up to complex advice to those hoping to forge a career in banking and finance.
Arig Bank goes out of its way to ensure that it reaches out to people in places that other banks will not or cannot go. Thus, while financial literacy training might take place one week at its main headquarters on Chinggis Avenue in the capital, it is just as likely to be hosted the following Saturday at an Arig branch in Darkhan city in the north, or the remote central region of Bumbugur.
Radnaa and Odon Darjaa, Arig’s head of sustainability, point proudly to the highly specific outreach work the bank does, notably providing financial literacy coaching to more than 60 orphaned teenagers from around the country, in the year to May 2018.