Value Added Investment Value Added Investment OpportunitiesOpportunities
Mr. Randolph S. Mr. Randolph S. KoppaKoppaPresidentPresident
Trade and Development Bank of MongoliaTrade and Development Bank of Mongolia
““ Mongolia Investment Summit 2010Mongolia Investment Summit 2010””Hong Kong 14 October 2010Hong Kong 14 October 2010
Infrastructure needs offer opportunities forInfrastructure needs offer opportunities forHigh Tech SolutionsHigh Tech Solutions
Power
• Wind
• Coal gas
• Solar
Page 4
Infrastructure investments will openInfrastructure investments will openopportunities for Value Added Solutionsopportunities for Value Added Solutions
• Rail
• Road
• Air
Page 14
Present Transport NetworkPresent Transport Network
Page 15
Railway Development by 2015Railway Development by 2015
Page 16
Value Added from Mining: Value Added from Mining: SainshandSainshand
Page 17
Investor PresentationOctober 2010
Value Added Investment Opportunities in Financial Sector
DisclaimerDisclaimer
This presentation has been prepared by Trade and Development Bank of Mongolia LLC (“TDB”) for selected recipients for information purposes only. ING Bank N.V.,
Singapore Branch makes no representation or warranty (express or implied) of any nature nor is any responsibility or liability of any kind accepted with respect to
the truthfulness, completeness, fairness, reasonableness or accuracy of any information, projection, representation or warranty (expressed or implied) or omission
in this presentation. No information contained herein has been independently verified by ING Bank N.V., Singapore Branch.
This presentation is not a complete description of TDB and may not contain all of the information that you may consider material. This presentation contains certain
"forward-looking statements". Such forward-looking statements may include words or phrases such as "believes", "expects", "anticipates", "intends", "plans",
"foresees" or other words or phrases of similar import. Similarly, statements that describe objectives, plans or goals for both itself and for any of its business
components are also forward-looking statements. All such forward-looking statements are not guarantees of future performance and involve known and unknown
risks, uncertainties and other factors which may cause the actual results to be materially different from those contemplated by such forward-looking statements.
Such forward-looking statements are made based on management's current expectations or beliefs as well as numerous assumptions made by, and information
currently available to, management. Neither TDB nor any third party nor any of their respective affiliates, shareholders, directors, officers, employees, agents and
advisers makes any expressed or implied representation or warranty as to the accuracy, completeness, fairness or reasonableness of the information contained
herein and none of them shall accept any responsibility or liability (including any third party liability) for any loss or damage, whether or not arising from any error or
omission in compiling such information or as a result of any party's reliance or use of such information. The information and opinions in this presentation are subject
to change without notice. Neither TDB nor any third party has any obligation to, or intends to update or otherwise revise any statements reflecting circumstances
arising after the date of this presentation or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition.
This presentation is not an offer for sale of securities in the United States or any other jurisdiction. Any securities which are the subject of such offer will not
registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") and may not be offered or sold in the United States absent registration under the
Securities Act or pursuant to an exemption from registration. Any offer of such securities will be made by means of an offering document that will contain detailed
information about TDB and its management, including financial statements.
This presentation does not constitute a prospectus or other offering document in whole or in part. This presentation does not constitute an offer to sell or the
solicitation of an offer to buy or an advertisement with respect to the purchase or sale of any security and nothing contained herein shall form the basis of any
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AgendaAgenda
Mongolian Economy Recovery Fast
Overview of TDB
TDB’s Competitive Market Position
Robust Financial Performance
Mongolian Economy Recovery Fast
Overview of TDB
TDB’s Competitive Market Position
Mongolian Economy Recovery Fast
Overview of TDB
Robust Financial Performance
TDB’s Competitive Market Position
Mongolian Economy Recovery Fast
Overview of TDB
1. Mongolian Economy Recovering Fast
Mongolian Economy on Fast Track to Strong RecoveryMongolian Economy on Fast Track to Strong Recovery
■ The Mongolian economy witnessed a dramatic turnaround with annualized GDP growth rate reaching 5% for 1H 2010
■ Recovery supported by strong policy response to the crisis, increasing copper and coal imports by China and upward momentum in metal prices
■ International reserves are at an all time high of U S$1.6 billion, public finances are on a sound footing and GDP growth is expected to hit 8% for 2010
■ Signing of the Oyu Tolgoi investment agreement in lat e 2009 serves as a cornerstone for the development of Mongolia’s substantial mineral resources – new investment and local spending from mining projects should boost GDP growth
Mongolia’s Economy Recovered in Tandem with China’s Growth
Source: Asian Development Outlook 2010 Update, Asian DevelopmentBank
5.0(1.6)
8.910.28.6
7.310.6
6.1
11.19.19.6
14.212.7
11.310.110.0
(2)
2
6
10
14
18
2003 2004 2005 2006 2007 2008 2009 1H 2010
Real GDP YoY Growth (%)
Mongolia China
Foreign Direct Investments Recovering to Pre-Crisis Levels
Source: Mongolia Quarterly Economic Update July 2010, World Bank
0
200
400
600
800
1,000
2003 2004 2005 2006 2007 2008 2009 1Q 2010
US$ Million
Trade Deficit Almost Vanished with Rebound in Metal Prices
Source: Monthly Statistical Bulletin June 2010, Bank of Mongolia
(800)
(600)
(400)
(200)
0
200
2003 2004 2005 2006 2007 2008 2009 1H 2010
YoY (%)
(60)
(40)
(20)
0
20
40
60
80US$ Million
Trade Balance (LHS)
Export Growth (RHS)
Import Growth (RHS)
■ 2009 was a challenging year with many banks sufferi ng liquidity shortages and poor governance
■ Anod Bank, the fourth largest bank, was taken into conservatorship in December 2008 and a State Bank wa s established when Zoos Bank failed in November 2009
■ To restore public confidence, a blanket deposit guarantee was issued, prudential ratio requirements were tightened and enhanced banking supervision was implemented
■ Deposits are now on a rising trend, hitting a new p eak of US$2.3 billion in June 2010, up 47% from a year ago
■ A strengthened financial system will be able to sup port the upswing in activities anticipated in the corpor ate sectors, particularly in mining and related industr ies
NPLs Rose As Key Sectors in the Economy Slowed Down
Key Statistics in the Banking System
0
100
200
300
400
500
600
700
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10
MNT Billion
0
4
8
12
16
20(%)Principal in Arrears (LHS)
Non-Performing Loans (LHS)
NPL Ratio (RHS)Line 4
Source: Monthly Statistical Bulletin June 2010, Bank of Mongolia
Mongolia Ready For Upcoming Boom in Mining SectorMongolia Ready For Upcoming Boom in Mining Sector
Restored Confidence in the Banking System
11.6%
31.1%
9.4%
1,592.5
1,890.6
2,662.5
Jun 2009
17.4%
37.1%
13.3%
1,917.3
1,961.6
3,021.8
Dec 2009
45.9%23.6%Liquidity
7.2%
11.1%
1,434.3
1,947.2
2,480.1
Dec 2008
14.3%Capital Adequacy Ratio
14.0%NPL Ratio
Jun 2010(US$ Million)
2,129.8Total Loans
2,345.5Total Deposits
3,417.6Total Assets
Note: MNT/USD rate used = 1353.5
Source: Monthly Statistical Bulletin June 2010, Bank of MongoliaSource: Monthly Statistical Bulletin June 2010, Bank of Mongolia
0
1,000
2,000
3,000
4,000
2003 2004 2005 2006 2007 2008 2009 1H 2010
MNT Billion
40
60
80
100
120(%)Total Loans (LHS)
Total Deposits (LHS)
Loan to Deposit Ratio (RHS)
NPL ratio of the banking sector excluding Anod
Bank
NPL ratio of the banking sector excluding Zoos
Bank
2. Overview of TDB
(US$ Million) 2007 2008 2009 Jul 2010
Total Asset 416.3 487.1 598.7 608.8
Total Loans 282.5 325.3 300.1 330.6
Total Deposits 358.0* 376.4* 451.4** 492.6
Total Equity 49.6 50.6 49.6 57.3
Net Profit 12.1 12.1 11.1 7.7
Capital Adequacy 13.8% 14.7% 12.7% 13.8%
ROAA 3.3% 2.6% 2.1% 2.3%
ROAE 31.3% 24.0% 19.4% 24.5%
Bank HighlightsBank Highlights
Business Profile Strong Credit Fundamentals
TDB Rated One Notch Above the Mongolian Sovereign
Source: Company information, 31 July 2010
Note: MNT/USD rate used = 1353.5
D-Bank Financial Strength
B1Subordinated EMTN (foreign currency)
Ba3Senior unsecured EMTN (foreign currency)
Ba3 / NPLong- and short-term issuer ratings (domestic currency)
Ba3 / NP
Ba3 / NP
B2 / NP
Long- and short-term deposit ratings (domestic currency)
Long- and short-term issuer ratings (foreign currency)
Long- and short-term deposit ratings (foreign currency)
Source: Moody’s Investors Service
Second Most Profitable Bank in Mongolia
TDB’s Share in Banking Sector Net Profits
Largest Corporate Lender in Mongolia
TDB’s Share in Banking Sector Total Corporate Loans
NPL Ratio Substantially Below Industry Average
NPL Ratios
TDB52%
Others48%
Dominant Position in FX, Money, and Bullion markets
TDB’s Share in Banking Sector Total Gold Market
1 2
3 4
Source: Company information, 31 July 2010
Source: Company information, 31 July 2010
Source: Company information, 31 July 2010
5.0%5.3%
1.6%2.0%
3.3%
17.4%
13.4%
7.2%
0%
5%
10%
15%
20%
25%
2007 2008 2009 Jul-10
NPL Ratio (TDB)
NPL Ratio (Industry Ave.)
TDB27%
Others73%
TDB25%
Others75%
*Including the US$75 million Senior Notes**Including the US$41 million Senior Notes
TDBTDB’’s Strategy as a Leading Bank in Mongolias Strategy as a Leading Bank in Mongolia
Strengthen Leadership Position
in Corporate Banking
Strengthen Loan Portfolio
Quality
Expand Deposit Base
Target Niche Segments of Retail
Market
Expand Product Offerings to SMEs
3. TDB’s Competitive Market Position
TDB is One of MongoliaTDB is One of Mongolia’’s Leading Banks in All Discipliness Leading Banks in All Disciplines
Source: Monthly Statistical Bulletin July 2010, Bank of Mongolia and Company
information
Note: All data as of 31 July 2010
By Asset Size
TDB16%
Others84%
TDB27%
Others73%
By Net Profit
By Loan Size By Deposit Size
TDB15%
Others85%
TDB17%
Others83%
■ The Mongolian financial sector currently comprises 14 commercial banks
■ Significant share of banking sector profit from relatively smaller loan and asset size
■ Cost efficient corporate client-focused distribution strategy without unnecessary expansion into rural regions
By Equity Base
TDB20%
Others80%
US$608.8MM
US$57.3MM
US$7.7MM
US$330.6MM US$492.6MM
Strong ROE visStrong ROE vis--àà--vis peers in Mongoliavis peers in Mongolia
Note: Size of bubbles is proportionate to book value of average assets at 31 July 2010
Calculations based on average shareholders’ equity & assets and pre-tax earnings
2 of the 14 commercial banks (Credit Bank and Transport Development Bank) are excluded from this chart as they had negative ROAA of (51.2)% and (18.7)%
respectively
4. Robust Financial Performance
Asset Composition
Putting Our Assets to Work
Source: Company information, 31 July 2010
72.7% 75.5%
109.6%101.7%
71.8%66.1%62.8%
30.3%
0
200
400
600
800
1,000
2003 2004 2005 2006 2007 2008 2009 Jul-10
MNT Billion
0%
20%
40%
60%
80%
100%
120%Total Assets (LHS) Total Loans (LHS)
Loans / Deposits (RHS)
Loan Composition By Borrower Type
Source: Company information, 31 July 2010
Source: Company information, 31 July 2010
Cash 3%
Others6%
Interbank Deposits
22%
Investment Securities
15%
Loans54%
■ Asset composition is well balanced between interban kdeposits, financial markets and loans
■ Post-financial crisis, lending activities recovered and our loan portfolio grew 10.2% in July 2010 since Decemb er 2009
■ Consistent with our strategy to expand coverage int o the SME and high net-worth segments, we see an increase in loan portfolio contribution from these segments
■ We have achieved 26.0% and 39.7% CAGR growth in our asset and loan portfolios from 2003 to 2009 respect ively
Well Diversified Assets Ensure Adequate Risks and ReturnsWell Diversified Assets Ensure Adequate Risks and Returns
SME4%
Corporate81%
Retail15%
NPL Ratio Substantially Below Industry AverageNPL Ratio Substantially Below Industry Average
Loan Composition By Economic Sector
Loan Portfolio and NPL
Source: Company information, 31 July 2010
Past Due and NPL Structure
Source: Bank of Mongolia, Company information, 31 July 2010
Source: Company information, 31 July 2010
Agriculture5%
Others20%
Petrol import and trade
7%
Manufacturing21%
Mining and quarrying
14%
Construction19%
Corporate Trading
14%
■ Loan portfolio in terms of industry exposure is wel l-diversified across Mongolia’s most important indust ries such as the mining and related sectors
■ Policy to have all loans 100% collateralized at lea st 65% with real estate and remainder with PP&E, mining licenses, gold, working capital etc
■ Our NPL ratio improved dramatically from 27.7% in 2 003 to below 2% at the end of 2008. It rose to above 7% at one point during the 2009 credit crunch before receding to 5.0% in July 2010
■ Current NPL ratio of 5.0% is well below industry av erage of 14.0% as a result of a prudent risk management p olicy
5.0%5.3%
1.6%2.0%4.4%
7.2%9.5%
27.7%
0
100
200
300
400
500
2003 2004 2005 2006 2007 2008 2009 Jul-10
MNT Billion
0%
5%
10%
15%
20%
25%
30%Non-performing loans (LHS)
Loan Portfolio (LHS)
NPL Ratio (RHS)
0
10
20
30
40
50
2003 2004 2005 2006 2007 2008 2009 Jul-10
MNT BillionBad Doubtful Substandard Past due
Absolute amount decreased even as loan portfolio increased by 10.2%
Capital Adequacy Ratio
Prudent Cushion Over Regulatory Requirements
Source: Company information, 31 July 2010
Equity Growth Remains Strong
Source: Company information, 31 July 2010
Source: Company information, 31 July 2010
■ As at July 2010, total shareholders’ capital reached US$57.3 million
■ Book equity grew at 30.6% CAGR from 2003 to 2009, demonstrating resilience from financial crisis
■ BoM raised the minimum required CAR level from 10% t o 12% to promote a more resilient banking system in Mongolia
■ Our policy is to maintain substantially higher thre sholds than the minimum BoM requirements so the implementation of tighter prudential ratio requirem ents has no impact on us
Strong Capital Base to Support Future GrowthStrong Capital Base to Support Future Growth
23.1%22.4%
15.1% 13.8%12.7%
14.7%13.8%
18.6%
0%
5%
10%
15%
20%
25%
2003 2004 2005 2006 2007 2008 2009 Jul-10
BoM raised minimum
required level to 12%
Prudential Ratios BoM Threshold TDB Ratios
Capital Adequacy Ratio >12% 13.8%
Liquidity Ratio >18% 49.1%
Foreign Currency Exposure <10% 4.8%
Single Borrower Exposure/ Capital Funds <20% 18.8%
Related Party Lending / Capital Funds <5% 0.2%
13.5
77.5
67.168.5
60.3
49.7
37.8
22.7
0
20
40
60
80
2003 2004 2005 2006 2007 2008 2009 Jul-10
MNT Billion
Diversified Funding Sources and Strong Funding Base
On-lending Syndicated Loan Facilities
Source: Company information, 31 July 2010
Current Funding Profile
Source: Company information, 31 July 2010
Source: Company information, 31 July 2010
■ A strong funding base supports anticipated increase in lending activities given optimism in economic growt h
■ Main source of funding derived from current and dep osit accounts of our corporate and retail clients
■ Funding alternatives reduce reliance on short-term deposits, thereby reducing volatility in funding co sts, asset / liability gap management and interest margi ns
■ Extensive experience in international banking transactions, including trade finance with over US$ 150 million in credit lines, syndicated lending activit ies
■ Implementation of various on-lending programs in cooperation with many international financial insti tutions for our core corporate clients
Continuous Access to Diversified Funding SourcesContinuous Access to Diversified Funding Sources
0
200
400
600
800
1000
2003 2004 2005 2006 2007 2008 2009 Jul-10
MNT Billion Securities Issued and OthersRetained EarningsEquitySubordinated DebtInterbank LoansDeposits
Securities Issued & Others
3%
Equity3%
Retained Earnings
7%
Interbank Loans7%
Deposits80%
US$25MM Trade Finance Line
US$3.25MM Facility Agreement on the Re-lending Basis employer
EUR4.3MM Financial Sector and SME Development Facility
US$25MM Two-Step Loan Project for SME Development and Environmental Protection on the On-Lending Basis
US$6.2MM Second Private Sector Development Project Facility on the On-Lending Basis
EUR6MM Trade Finance Line
US$2.23MM Payment Assignment Facilities on the On-Lending Basis
US$15MM Syndicated Term Loan Facility
Efficient Cost Management Supports Solid Profitabil ity
Interest Income Grows with Strong Net Interest Marg ins
Source: Company information, 31 July 2010
Source: Company information, 31 July 2010
■ Able to defend our profitability during the global economic crisis – recorded strong earnings in 2009 e ven when the Mongolian economy contracted by 1.6% that year
■ Interest income dominates income composition ���� aim to increase contribution from fee based income
■ With greater efficiency, cost efficiency ratio rema ins at stable levels - best in class cost efficiency amongs t peer group
■ Achieved strong returns in terms of ROAE (24.5% in July 2010) and ROAA (2.3% in July 2010)
Stable Profitability Despite Stress in Domestic EconomyStable Profitability Despite Stress in Domestic Economy
8%8% 8%
6%5%
7%
5% 4%
0
10
20
30
40
2003 2004 2005 2006 2007 2008 2009 Jul-10
MNT Billion
0%
2%
4%
6%
8%
10%
12%
14%Net Interest Income (LHS)
Net Non-interest Income (LHS)
Net Interest Margin (RHS)
0
10
20
30
40
50
60
2003 2004 2005 2006 2007 2008 2009 Jul-10
(%) Cost Efficiency Ratio (RHS) ROAA ROAE
5.4
7.4
11.8
16.4 16.315.0
10.4
2.6
0
5
10
15
20
2003 2004 2005 2006 2007 2008 2009 Jul-10
MNT Billion
(5)
0
5
10
15(%)Net Income (LHS) Column 2
Mongolia GDP Growth (RHS)
Profit Stability Even During Global Economic Crisis
Source: Company information, 31 July 2010
On pro-rata basis for full year 2010
Note: 2008 Net non-interest income is diminished due to a write down of trading losses
Thank You!