Hong Kong, April 16, 2018 -- Moody's Investors Service today upgraded the long-term local currency deposit ratings of Golomt Bank LLC and Trade and Development Bank of Mongolia LLC (TDBM) to B3 from Caa1.

Moody's has also upgraded each bank's baseline credit assessment (BCA) and adjusted BCA to b3 from caa1.

Moody's has also upgraded each bank's Counterparty Risk Assessment to B2(cr) from B3(cr).

Moody's has also newly assigned a local currency and foreign currency issuer rating of B3 to Golomt Bank.

For both banks, outlook on all ratings is stable.

Today's rating actions conclude the review for upgrade placed on the two banks on 19 January 2018.

A list of affected ratings can be found at the end of this press release.

RATINGS RATIONALE

The upgrade of Golomt Bank and TDBM's ratings reflect our view that their capitalization will remain at levels consistent with a BCA of b3 upon the completion of the Asset Quality Review (AQR).

According to the International Monetary Fund and the Bank of Mongolia, the AQR found a relatively modest capital shortfall in the banking system -- about 1.9% of GDP at the end of 2017 -- and a system-wide capital adequacy ratio of 13.7% at the end of 2017.

While bank-level information was not made public, Moody's believes the two banks' capitalization will remain sufficiently stable to merit the upgrade of their BCAs to b3 from caa1, given the better-than-expected AQR results, and Golomt Bank's reported CET1 ratio of 9.45% and TDBM's CET1 ratio of 14.02% at the end of 2017.

While we expect loan growth to remain strong in 2018, Moody's believes that the banks will have plans in place -- including any capital raisings, if necessary -- to ensure adequate capitalization is maintained by the end of December, according to the schedule laid out by the Bank of Mongolia.

We also believe that the banks will benefit from improving liquidity in Mongolia and the implementation of wide-ranging policy reforms targeted at improving economic fundamentals. For example, amendments to the Central Bank law, Banking law and deposit insurance law have been completed. Growth also remains strong in Mongolia, which will be supportive of bank asset quality. Mongolia reported real GDP growth of 5.1% in 2017.

WHAT COULD CHANGE THE RATINGS UP

The BCAs of Golomt Bank and Trade and Development Bank of Mongolia are at the same level as the Mongolian sovereign rating, and as such a positive rating action is unlikely in the absence of upward pressure on the sovereign rating.

WHAT COULD CHANGE THE RATINGS DOWN

For Golomt Bank and TDBM, factors that could result in a downgrade include (1) a downgrade of Mongolia's sovereign rating; or (2) a downgrade of the banks' BCAs. The banks' BCAs could be downgraded if: (1) asset quality deteriorates significantly, for example, with problem loans/gross loans exceeding 9.0% for a sustained period; (2) tangible common equity ratio falls below 8%; or (3) profitability deteriorates significantly, leading to annual net losses on a sustained basis.

The principal methodology used in these ratings was Banks published in September 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Golomt Bank LLC is headquartered in Ulaanbaatar. It reported total assets of MNT5,205.3 billion (USD 2,144.6 million) as of 31 December 2017. Trade and Development Bank of Mongolia LLC is headquartered in Ulaanbaatar. It reported total assets of MNT6,874.9 billion (USD 2,832.5 million) as of 31 December 2017.

List of affected ratings

Issuer: Golomt Bank LLC

- BCA and adjusted BCA upgraded to b3 from caa1

- Long-term Counterparty Risk Assessment upgraded to B2(cr) from B3(cr)

- Short-term Counterparty Risk Assessment of NP(cr) affirmed

- Local Currency Long-term Deposit Rating upgraded to B3 from Caa1; outlook changed to stable from ratings under review

- Foreign Currency Long-term Deposit Rating of Caa1 affirmed, outlook maintained at stable

- Local Currency and Foreign Currency issuer rating of B3 assigned; outlook stable

Issuer: Trade and Development Bank of Mongolia LLC

- Baseline Credit Assessment (BCA) and adjusted BCA upgraded to b3 from caa1

- Long-term Counterparty Risk Assessment upgraded to B2(cr) from B3(cr)

- Short-term Counterparty Risk Assessment affirmed at NP(cr)

- Local Currency Long-term Deposit Rating upgraded to B3 from Caa1, outlook changed to stable from ratings under review

- Foreign Currency Long-term Deposit Rating affirmed at Caa1, outlook maintained at stable

- LC/FC Short-term Deposit Rating, affirmed at NP

- LC/FC Long-term Issuer Rating upgraded to B3 from Caa1, outlook changed to stable from ratings under review

- LC/FC Short-term Issuer Rating, affirmed at NP

- Backed FC Senior Unsecured upgraded to B3 from Caa1, outlook changed to stable from ratings under review

- FC Senior Unsecured MTN upgraded to (P)B3 from (P)Caa1

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

The first name below is the lead rating analyst for this Credit Rating and the last name below is the person primarily responsible for approving this Credit Rating.

Sophia Lee
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350

Published Date:2018-04-17