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Khan Bank: combining profit with purpose

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Khan Bank is the benchmark for financial stability and innovation in Mongolia. The country’s biggest and best lender has spearheaded technological change for nearly three decades, setting the bar ever higher.

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Originally set up to serve farmers and herders, Khan was the first bank to install ATMs in rural areas. Later, it pioneered mobile banking, installed the first fully automated 24/7 banking centres and introduced multi-purpose kiosks tailored to a digitally connected populace. 

Under chief executive John Bell, Khan Bank continues to set the pace. In March 2018, Pankaj Patel, a former ANZ and ABN AMRO banker, was hired as the bank’s first chief information officer. Bell’s long-term aim is to leverage Khan Bank’s vast customer base to transform it into the country’s most customer-centric organization, a one-stop-shop for all financial and retail needs. Non-branch transactions are tipped by the bank to make up 99% of all transactions by the end of 2019. 

Scale, clout and reputation

It’s a strategy that is bold and achievable. Khan Bank has the scale, clout and reputation to realize its ambitions. It employs more than 6,000 staff across 530 branches, serving over three-quarters of the population, and accounts for 80% of all mobile banking transactions. The Ulaanbaatar-based outfit is highly respected across the corporate and financial spectrum: Khan Bank was named best bank in Mongolia in 2018 by Euromoney and Asiamoney magazines.  

Khan is probably the country’s biggest investor in digital, not to mention one of the smartest. Also in 2018, it upgraded its entire digital platform, enabling customers to sign up for new banking services, apply for loans and cards and open new accounts, all without needing to set foot in a branch. It was the first lender to introduce facial recognition functionality on its smartphone app, and Qpay, Mongolia’s first QR code payment service.

Underpinned by Infosys software, Khan Bank has a host of new upgrades and services in place ready to be rolled out in 2019. Before the end of the year, Khan Bank aims to be a true omni-channel digital bank, providing a frictionless financial experience for all customers across laptops, mobiles and tablets. 

Financially strong to the core

Khan Bank’s robust finances are predicated upon years of hard work, as well as a recent and much-needed uptick in the sovereign’s fortunes. A $5.5 billion IMF-led bailout, which included soft loans from the World Bank and Asian Development Bank, injected momentum into the wider economy. GDP is on track to grow by 6.4% in 2019, driven by rising commodity exports and private consumption.  

Khan Bank is investing in its future – and Mongolia’s future – while the sun shines. It posted a 35% year-on-year rise in net profit in 2017, with return on equity climbing to 18.3%, tier-1 capital topping 22%, and its cost-to-income ratio falling below 45%. At the end of September 2018, the non-performing loan ratio was 6.2%, down from 7.7% the previous year. 

The bank has welcomed a series of ratings upgrades over the past 18 months. In January 2018, Moody’s upgraded Khan Bank’s long-term local currency deposit rating to B3 with a stable outlook. Investors have taken note. In October 2018, the bank signed a $120 million syndicated loan with four EU-based development finance institutions, including Germany’s DEG, Austria’s OeEB and Netherlands-based FMO. The syndicated long-term facility, the Mongolian bank’s largest ever loan, will be used to expand access to financing for SMEs, further improve the bank’s underlying finances and put it in line for future upgrades. 

Marrying profit with purpose

Khan Bank firmly believes that profit and purpose can be mutually supportive forces. It has long been a leading proponent of corporate and social responsibility, and a substantial portion of the syndicated loan has been set aside to strengthen the bank’s environmental and social management systems. It recently adjusted its core long-term CSR ambitions to include the United Nations’ 17 Sustainable Development Goals. 

At the heart of its CSR platform is the 12-year-old Khan Bank Foundation, which channels a share of the lender’s annual profits into worthy projects ranging from education to health, and the arts to rural development. It funds anti-cancer screening campaigns and reforestation programmes, and channels capital to outstanding and disadvantaged scholars. 

Khan Bank highlights

  • 35% year-on-year rise in net profit in 2017, with return on equity of 18.3%.

  • Named best bank in Mongolia in 2018 by Euromoney and Asiamoney magazines. 

  • Raised $120 million via syndicated loan to expand access to financing for SMEs.

  • In 2018, Moody’s upgraded Khan Bank’s long-term local currency deposit rating to B3 with a stable outlook. 

  • Serves three-quarters of the population, with an 80% share of all mobile banking transactions. 

  • Non-branch transactions to make up 99% of all transactions by the end of 2019. 

  • First lender to introduce QPay and facial recognition.

  • CSR pedigree: Khan Bank Foundation backs nationwide social and health projects. 

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