Hong Kong, December 09, 2020 -- Moody's Investors Service has upgraded the long-term foreign currency deposit ratings of eight Mongolian banks to B3 from Caa1. At the same time, Moody's has downgraded the long-term foreign currency counterparty risk ratings of all nine Mongolian banks that Moody's rates to B3 from B2.

The rating actions are driven by changes in the foreign currency (FC) country ceilings applied to Mongolia following the publication of Moody's updated Country Ceilings Methodology on 7 December 2020. This methodology is available at this link: https://www.moodys.com/researchdocumentcontentpage.aspx....

Today's rating actions cover: (1) Bogd Bank LLC, (2) Capitron Bank LLC, (3) Development Bank of Mongolia LLC (DBM), (4) Golomt Bank LLC, (5) Khan Bank LLC, (6) State Bank LLC, (7) Trade and Development Bank of Mongolia LLC (TDBM), (8) Transport and Development Bank LLC (TransBank), and (9) XacBank LLC.

All other ratings and assessments of the above banks are unaffected by today's actions.

The full list of affected credit ratings is provided at the end of the press-release.

RATINGS RATIONALE

Today's rating actions on nine Mongolian banks are driven by changes in country ceilings under Moody's updated country ceilings methodology. Country ceilings indicate the highest rating level that generally can be assigned to the financially strongest obligations of issuers domiciled in a country.

The updated ceilings methodology has unified deposit ceilings with the typically higher debt ceilings, whereby LC and FC country ceilings are no longer distinguished between deposit and debt ceilings. These changes reflect Moody's view that the risks that affect access to bank deposits are not materially different from those that affect the ability of banks and non-banks to service their debt obligations.

FOREIGN CURRENCY CEILINGS

As a result of the methodology change, Mongolia's FC ceiling has been changed to B3. Consequently, the long-term FC deposit ratings of eight Mongolian banks have been upgraded to B3, because these ratings were previously constrained by FC deposit ceiling.

At the same time, long-term FC counterparty risk ratings of all nine rated Mongolian banks were downgraded to B3, because these ratings are now subject to the new FC ceiling of B3, as opposed to the FC debt ceiling of B1 previously.

OUTLOOK

The outlook on all nine rated Mongolian banks is negative. The negative outlook, in place since May 2020, is driven by the negative outlook on the Mongolian government's B3 issuer rating, reflecting rising external vulnerability risks related to a sharp fall in export revenue at a time when access to external financing is highly uncertain.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Bogd Bank LLC:

Given the negative outlook, an upgrade of the bank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if the sovereign's outlook returns to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade the bank's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans rise significantly without a strengthening of capitalization, or if its funding and/or liquidity strength deteriorates significantly.

Capitron Bank LLC:

Given the negative outlook, an upgrade of the bank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if the sovereign's outlook returns to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade Capitron Bank's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans increase significantly without a strengthening of capitalization, or if its funding and/or liquidity strength deteriorates significantly.

Development Bank of Mongolia LLC:

Given the negative outlook, an upgrade of the bank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term issuer rating to stable if the sovereign's outlook is changed to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade DBM's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans increase significantly without a strengthening of capitalization, or if its funding and/or liquidity strength deteriorates significantly.

Golomt Bank LLC:

Given the negative outlook, an upgrade of the bank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if the sovereign's outlook returns to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade Golomt Bank's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans rise significantly without a strengthening of capitalization, or if its funding and/or liquidity strength deteriorates significantly.

Khan Bank LLC:

Given the negative outlook, an upgrade of the bank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if the sovereign's outlook returns to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade Khan Bank's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans increase significantly without a strengthening of capitalization, or if its funding and/or liquidity strength deteriorates significantly.

State Bank LLC:

Given the negative outlook, an upgrade of the bank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if the sovereign's outlook returns to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade State Bank's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans rise significantly without a strengthening of capitalization, or if its funding and/or liquidity strength deteriorates significantly.

Trade and Development Bank of Mongolia LLC:

Given the negative outlook, an upgrade of TDBM's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if (1) the outlook on the sovereign rating returns to stable, (2) the risks in the bank's operating environment remain broadly stable, and (3) the bank maintains stable credit metrics.

Moody's could downgrade TDBM's ratings if its BCA is downgraded or if the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans rise significantly without a strengthening in its capitalization, or if its funding and/or liquidity materially deteriorates.

Transport and Development Bank LLC:

Given the negative outlook, an upgrade of the bank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if the sovereign rating outlook returns to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade TransBank's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans rise significantly without a strengthening of its capitalization, or if its funding and/or liquidity strength materially deteriorates.

XacBank LLC:

Given the negative outlook, an upgrade of XacBank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if the sovereign's outlook returns to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade XacBank's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans rise significantly without a strengthening of capitalization, or if its funding and/or liquidity strength deteriorates significantly.

The principal methodology used in these ratings was Banks Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx.... Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

All entities are headquartered in Ulaanbaatar. The banks reported the following assets as of 31 December 2019:

Bogd Bank LLC: MNT249 billion (USD91 million)

Capitron Bank LLC: MNT1.0 trillion (USD369 million)

Development Bank of Mongolia LLC: MNT4.27 trillion (USD1.56 billion)

Golomt Bank LLC: MNT6.64 trillion (USD2.43 billion)

Khan Bank LLC: MNT10.19 trillion (USD3.72 billion)

State Bank LLC: MNT3.30 trillion (USD1.20 billion)

Trade and Development Bank of Mongolia LLC: MNT7.80 trillion (USD2.85 billion)

Transport and Development Bank LLC: MNT524 billion (USD191 million)

XacBank LLC: MNT3.45 trillion (USD1.26 billion)

LIST OF AFFECTED RATINGS

..Issuer: Bogd Bank LLC (Analyst: Sean Roh)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

..Issuer: Capitron Bank LLC (Analyst: Sean Roh)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

..Issuer: Development Bank of Mongolia LLC (Analyst: Tae Jong Ok)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

..Issuer: Golomt Bank LLC (Analyst: Tae Jong Ok)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

..Issuer: Khan Bank LLC (Analyst: Tae Jong Ok)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

..Issuer: State Bank LLC (Analyst: Sean Roh)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

..Issuer: Trade and Development Bank of Mongolia LLC (Analyst: Tae Jong Ok)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

..Issuer: Transport and Development Bank LLC (Analyst: Sean Roh)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

..Issuer: XacBank LLC (Analyst: Sean Roh)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx....

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

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The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

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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.

Se Hoon Sean Roh

Analyst

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

Client Service: 852 3551 3077

Sophia Lee, CFA

Associate Managing Director

Financial Institutions Group

JOURNALISTS: 852 3758 1350

Client Service: 852 3551 3077

Releasing Office:

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

Client Service: 852 3551 3077