Professional Documents
Culture Documents
Financial report 40
Asset management 41
Deposits 41
Own equity 41
Financial performance 42
Financial performance ratios 42
BOLD Luvsanvandan
Chairman of the Governing Board
It is my pleasure to report to our esteemed business partners, clients and customers the
performance of Golomt Bank in 2003. On behalf of the Board of Directors and
shareholders of the Golomt Bank I would like to express our full satisfaction with regard
to the Golomt Bank operations over the past year. While we assessed highly the results
of our work produced last year, we have developed a very optimistic plan for the year
2004. We consider that Golomt Bank has achieved its objectives by way of expanding
operations in the Mongolian banking and financial market and introducing many new
products and services. As a result the total assets of Golomt Bank grew by 44 percent
and reached 15 percent of the total assets of the banking system by the end of 2003.
We can proudly state that the Bank impressive results in growth and expansion of
operations were due to our successful cooperation with customers, clients and business
partners. Based on our achievements Golomt Bank was awarded in 2003 with awards
for "Outstanding Business Development" by the Visa International, for "Best Partner in
Mongolia Market" by the Mastercard International, "The Best Banking and Financial
Brand of Mongolia" by Chamber of Trade and Industry of Mongolia and PR Association,
"The Best Student Representative" by the Union of Mongolian Students. We can assure
you that we will be further carrying out successfully our activities and introducing many
innovations relying on the full confidence of our customers.
Taking this opportunity I would like to express once again our gratitude for your
confidence and cooperation and our best wishes for success in your business and
activities. We extend our best wishes for expansion and development of our continued
cooperation and mutual benefit.
BOLD Luvsanvandan
Chairman of the Governing Board
6
BAYASGALAN Danzandorj
President and CEO
The overall economic prospects and legal and political environment were relatively
stable and there were no significant changes related to the banking sector in 2003. It
should be mentioned that the Government and the Central Bank played a significant role
in ensuring further sustainable development of the Mongolian banking and financial
sector and creating favourable conditions for the banking sector operations, including
Golomt Bank.
In 2003 Golomt Bank total assets increased by 44 percent and reached MNT 114.1
billion, thus advancing our position in the banking and financial market.
The competition at the Mongolian banking and financial market has significantly
intensified from year to year and last year the banking and financial institutions
continued to compete mainly in terms of product pricing. Due to severe price
competition banks were not able to reduce the cost of borrowed funds. On the other
hand, the trend in the decline in lending rates continued throughout 2003. In the
conditions of mounting competition Golomt Bank though proposed to clients and
customers favourable and competitive prices. Though it did not pursue a policy to
compete by pricing, its primary objective was to gain the confidence of its clients and
customers in order to become the most credible bank. As a result, the total number of
customers increased by approximately 86%. In 2003 Golomt Bank has made significant
steps towards reducing substantially the Bank risk and advancing its competitive
position by increasing its capital by 3 billion tugrugs. In the last year, our bank's net
income after tax increased to MNT 1.1 billion and the bank paid income tax of MNT
767 million to the state budget.
Golomt Bank since its establishment has aimed to introduce new and modern products
and services in the Mongolian banking and financial market in order to meet the
demands of clients and customers. In the course of the past year several new products
have been initiated and introduced by Golomt Bank to the market.
In 2003 new products and services, like childrens' "Golden Key" savings account, "the
Golden Ear" RMB card service in cooperation with the Agricultural Bank of the People's
Republic of China , "Mongolian students discount card" have been introduced. Also the
cooperation with Visa International, Mastercard International has been expanded and
Visa International Visa Electronic and Mastercard International Maestro cards have been
newly introduced, thus making more diversified the choices of our products and
services.
7 8
In order to advertise and familiarize the clients with bank products and services and Esteemed business partners and customers,
provide them with in-depth knowledge about the banking services the advanced method
of direct marketing was initiated and this has given us very positive results. With the I am proud to state that Golomt Bank has achieved its goals planned for 2003 and
objective to save the time of the clients as well as to provide the different types of the produced even better results beyond our expectations. We are fully conscious that we
bank services from a single point and in order to provide with business advice, Premier are at the intial stage of our productive activitity and we have to advance further and
Banking service was expanded and Consultancy Unit for business and other issues was create more. Therefore, we plan 2004 to be the year of business success and new
established. productivity. We consider that cooperation with our customers, borrowers, cardholders
is of great significance. We extend to our business partners, customers, foreign and
Last year we paid special attention to providing high quality services rather than domestic clients, organizations and individuals and to all Mongolian people our best
expanding our services in quantitative terms. The mortgage loans to the individuals wishes for success in their activities and well-being. We wish you all this year to be the
were initiated using the funding under the Asian Development Bank project and from most successful year.
our own resources. Small credits have been increased and credit card services have
been activated through the Branch offices and centers. While we expanded the scope of
our products and services, we also faced a growing demand to expanding our external
relations and ensuring a more flexibility to our services. In 2003 we concluded the
agreements on cooperation with the Agricultural Bank of China, with CIC of France, and
Rabobank of Holland as well as renewing our agreements with some correspondent
banks to manage efficiently our funds. In order to promote foreign investment and
businesses to Mongolia from foreign countries new credit opportunities were created by BAYASGALAN Danzandorj
concluding agreements with the Export and Import Bank and the Land Bank of Taiwan President and CEO
and the Samsung Corporation of Korea.
We also streamlined and activated our products and services, internet and electronic
banking, on-line banking, which were introduced by Golomt Bank in the previous years.
We paid special attention to the reliability of bank information technology and developed
and started to utilize new accounting, credit, saving management information software
programs.
Last year the Bodi Tower, a combination of modern and classic construction design,
was commissioned and occupied. Within the framework of the "Investment and
Productivity Year" we have donated 101 million tugrugs to the city of Ulaanbaatar. We
also initiated our activities aimed to the benefit of our children who determine the future
of the country and we selected the World Vision organization amongst other
international and non-governmental organizations in this area and we are actively
cooperating with this organization.
9 10
Vision Strategy
To be the market leader in Mongolia, a reputable and credible bank with sound international To introduce new technologies
standard banking practices
to introduce the latest achievements in information technology in its activities on a continuous
Mission basis and to make constant upgrading.
To be the market leader in innovation and the supplier of the best customer oriented banking and To provide the market with a high quality and premium service
financial services and the most efficient bank with talented employees contributing to the social
and economic development of the country to introduce successfully traditional and new types of financial services to the targeted market
based on customer demand.
Goals to streamline and to sustain the new types of customer services.
To restructure and reorganize the Bank as a public company, the shares of which are freely To attract new customers and to build customer loyalty
traded on the stock exchange.
to analyze demands of different segments of customers and to operate efficiently in respond to
To gain the leading position in the market and sustain it for long- term. those demands.
to provide customers with efficient, friendly and high quality services.
To introduce and develop advanced technologies in all the activities of the bank. to care about customers and to create an atmosphere of trust and confidence.
To develop actively all types of credit facilities and to minimize loan losses. To create a team of capable and professional staff.
To maximize balance on the current accounts as a percentage of the total deposits and to to strengthen the Bank human resources and to create favourable conditions for the personal
increase long-term customer deposits. development of every employee.
to improve efficiency by increasing each employee's productivity.
To streamline the payment card market, to strengthen the bank's leading position and increase to make an annual assessment of each employee's merit and contribution and to create
the number of the cardholders and volume of card transactions. incentives to work effectively and increase their responsibility.
to ensure that the Bank and the employee both develop and advance.
To introduce new types of financial services.
To contribute to the social and economic development of the country.
to make a major contribution to the social and economic development of the country in a
comprehensive way.
to carry out activities directed to protecting the environment and making better the lives of
children who are the country's future.
to introduce the new types of customer services on the basis of actual assessment of the
business environment by ensuring flexible price policy, providing accurate and timely
information and advertising, prioritizing and activating marketing.
to create an image of a bank which highly values customers.
to establish Bank branches and units first in our neighbouring countries and later in other
foreign countries
Management Team
TSERENDAVAA Namuu BOLD Canbat SUGAR Dashbazar ENKHTUVSHIN OYUN-ERDENE Lamjav GANBOLD Galsan GANKHUYAG Gombosuren CHIMEGMUNKH Munkhuu MUNKHTUR Dagva GANBAT Jamiyan NATSAGDORJ Namkhai
Director of Information Director of Marketing Director of Back Office Sodnomtseren Director of Investment & Vice President & Director Vice President & Director Vice President & Director Vice President & Director Director of Internal Director of Branch
Technology Department Department Director of Project Finance Department of Supports Division of Treasury Division of Financial Control Division of Corporate Banking Division Audit Department Management
Card Center
15 16
Macroeconomy In 2003 the overall industrial output grew to MNT 276.6 billion (in 1995 relative prices)
with increase of 2% or MNT 5.5 billion compared to the previous year. The reason for
The overall economic situation of Mongolia was characterized by positive trends in this performance of the industrial sector was due to increases in the oil and gas
recent years and the economic growth has been stable. The preliminary budget exploration, in cigarette production, in publishing and recording, in wood processing and
performance for 2003 indicates that the total revenues and grants of Mongolia's manufacturing, in metal processing and production, in clothing and sewing and fur
consolidated budget total to MNT535.8 billion and total expenditure and net lending processing. The industrial output growth also was due to a 1% increase in electricity,
amount to MNT 616.5 billion by widening the budget deficit to MNT 80.8 billion, which energy and water supply, a 6.7% increase in manufacturing and processing, despite a
is by MNT 9.1 billion higher compared to the previous year. The budget current revenue 1% decline in the minerals and mining sector.
has amounted to MNT 526.4 billion and current expenditure has totalled to MNT 446.3
billion, which made the current balance with surplus of MNT 80.1 billion. According to the preliminary estimates the total number of livestock has reached 25.8
million heads in 2003, including the 7.9 million newlyborns and 1.3 million heads were
Real Sector lost, which was 1.6 million less than in the previuos year. In 2003 the output of the
The real growth of GDP reached 1% in 2001, picked up to 4% in 2002 and preliminary three staple crops was 165 thousand tons of cereals, 78.7 thousand tons of potatoes
performance for 2003 has indicated the growth rate of 5.3 % in 2003 by increasing the and 59.6 thousand tons of vegetables, which are by 39.2 thousand tons of cereals,
nominal GDP to MNT 1,359.7 billion. The positive growth of GDP in recent years 19.9 thousand tons of potatoes, 26.8 thousand tons of vegetables higher than in the
indicate the improvement of overall economic situation and creation of favourable previous year.
conditions for business environment, thus deepening confidence of banking institutions,
clients and customers. Growth in construction and maintenance was 23.7% in 2003. In the housing sector
under Housing sector financing project funded by ADB concessional loan 500
GDP growth (in 1995 relative prices) individuals have borrowed 5.6 billion tugrugs out of which 88% were allocated for
6.0% purchase of condominiums, 8,9% were for completion of construction of private houses
5.0%
and 2% was allocated to Condominium Associations for maintenance and repair works.
4.0%
In 2003 all types of transport have carried 17.6 million tons of goods and by counting
3.0%
167.9 million passengers, which are higher by 4.1 million tons of load and increase by
2.0% 58.8% or 62.2 million people compared with the previous year. In the communication
1.0% sector a new advanced technology has been introduced and foreign investment and
technical and economic cooperation has been actively underway. In 2003 all aimags and
Source: Statistical bulletin 0.0%
1999 2000 2001 2002 2003 cities have been covered by the mobile phone network with increase of 8.8 thousand
mobile phone centers as well as increase of 62.6 thousand mobile phone users.
The preliminary performance for 2003 show that per capita GDP income has reached
USD 476.4, growing by 4.8% compared with the previous year and by 24.1% The marcoenomic stability and the creation of the favourable banking and financial
compared to 1999. environment has influenced the growth of the wholesale and retail trade and other services.
The money supply to GDP ratio has accelerated to 51.6% in 2003 from 24.8% in 2000 Foreign trade
and the savings deposits to GDP ratio has increased to 26.7% in 2003 from 8.9% in In 2003 the preliminary performance of foreign trade indicated that the total turnover of
2000, thus indicating the growth of the domestic savings and showing the evidence of foreign trade has reached USD1,387.5 million with exports amounting to USD600.2
restoring confidence in the financial sector. million and imports totalling to USD787.3 million. Total foreign trade turnover has grown
by 14.2% with increase in exports by 14.5% and with rise in imports by 14%. As a
In 2003 interbank loans and repo deals of the central bank bills totalled MNT 347 billion result the foreign trade deficit reached USD187.1 million at the end of 2003. Economic
and the annual average weighted interest rate of the deals was around 10%. Banks in growth, ratio of the average price growth rate of exported to imported goods, foreign
average daily holding of central bank bills amounted to MNT 42.4 billion and by the investment growth and increase of private transfers from individuals working abroad
end of the year the total amount of the central bank bills sold to the banks amounted to have accounted for most of the growth in recent years.
MNT 76 billion. The annual average weighted interest rate was raised to 11.5%, which
is by 1.5 unit higher than in the previous year. The world market price fluctuations of the main export goods directly affect our export
revenue. The average prices of the major export products at the world market are the
In order to meet the demands of the free market and remove the exchange rate following:
distortions at the market the Bank of Mongolia has started to announce daily the
exchange rates of major currencies. The exchange rate fluctuations show that the value Unprocessed Processed cash- Copper concen- Gold (1 ounce)
cashmere (1kg) mere (1 kg) trates (1 ton)
of tugrug against US dollar and euro have weakened by 3.8% and by 24.9%. The
tugrug has also depreciated against Japanese yen by 16.4% , against Chinese yuan by 1996-1999 average 19.5 50.8 344.2 317.5
3.8% and against Russian rouble by 12.7%. The development in the banking sector has 2000 30.5 70.1 323.1 276.6
been stable and the public confidence has been restored and favourable conditions for 2001 18.1 55.0 273.4 276.4
foreign investment have been created. Though those developments led to the increase of 2002 16.5 48.3 255.6 296.8
foreign currency supply, the dollarization affects the national currency tugrug by 2003 35.7 45.6 287.2 351.8
weakening its value. A major indicator of the dollarization process is the increase of ratio 2000-2001 average 25.2 54.7 284.8 300.4
of foreign currency savings to money supply totalling to 35.6% or a growth by 7 points.
Source: Customs foreign trade statistical bulletin
In the reporting period the total amount of the current accounts has increased by 80% The Golomt Bank Awards in 2003
and the savings accounts have accelerated by 72%, thus showing the increase of the
public confidence in the banking sector as well as the significant progress in the
development of the banking and financial sector. At the end of 2003 the size of the
own capital of the banking sector has increased by 80% and has reached MNT 110.4 Visa International Outstanding Business Development
billion indicating the growing economic capacity of the banks.
Unemployment
In 2003 the number of unemployed people registered at the Employment Agency has
reached 33.3 thousand or 3.5%, which is by 8% or 2.5 thousand higher than in the
previous year.
Credit Committee
In order to provide the customers with efficient services the installation of the most
Board of Executive Directors advanced bank software program and computer internal network was considered
Asset & Liability
essential. Therefore, special attention has been given to the improvement of the banking
Committee software program and to the introduction of the latest computer technology. During the
last five years the software program has been completely renewed 2 times and total
investment has amounted to hundreds of thousand. As the Bank scope and size and the
Corporate Retail Banking Card center Treasury Supports Financial number of customers have been constantly increasing the number of transactions are
Banking Division Division Division Control
gone up significantly. For instance, the number of interbank settlement transactions has
Division Division
reached 200 thousand, which was 30% higher than in the previous year. Therefore, in
order to overcome this challenge a new main objective has been put forward to
establish on-line banking based on the latest technology.
Corporate & Marketing & Risk Treasury Back office Accounting
SME lending New product management department & Financial
development control (MIS)
In 2003 the Bank branch offices have attracted 18,727 new customers who have
opened current and savings accounts. Also through branch offices the domestic Master
Investment Premier Customer International Information Strategy cards have been distributed. The loans made by the Bank branches are closely
and Project banking Service Dept. Technology & Planning supervised and monitored and around 13% of total loans have been disbursed through
Finance
the branch offices in the past year. In future the Bank will pay a special attention to
making the interest rate on the loans lent through the branch offices more flexible.
Microlending Branch Back office Trading in FX Legal service Risk
management & Money for the bank management
The automatization and installation of the accounting software system of the Bank
markets
branch offices has been fully completed and a 24-hour branch offices have been
connected to the on-line network within Ulaanbaatar. As a result the customers, savings
Branches Human deposit holders and borrowers were provided with a 24-hour service 7 days a week.
resources
In order to improve the Bank branch office management the project titled "the Best
Management Team" has been organized on a competitive basis amongst all workers and
Premises &
Administration
the results have been announced. The Bank workers have actively participated in this
event and have established their teams and in order to advance and accelerate the
operations of some branch offices have decided to implement their projects in 2004.
Security
service Also several professional training programs and seminars have been organized for the
Bank divisions and branch offices staff. All the staff have participated in the training
seminar titled "Smiling banker" organized to improve the ability and capability to provide
high quality service to customers, to change the ways of handling the customers and
smiling at them which has resulted in a positive outcome and gained the appreciation of
customers.
23 24
Financial Control Division to supply the Bank with capable personnel, to train and carry out on-job training, to
Financial Control Division is in charge of the Golomt Bank policy on assets and liabilities manage internal staff movements and to develop and implement the Bank's human
management, accounting policy, determination of the principal guidelines of the banking resources management policy.
and financial operations, assessment and evaluation of the performance, preparation of
the consolidated balance sheet, supervision and monitoring of reporting, carrying out Human Resource Management Report
research and analyses and reporting on the outcome. The division is also responsible for In 2003 58 employees were recruited, out of which a majority or 38 persons were
risk management, evaluation and assessment, preparation of a long- and a short-term employed at the Bank account centers, 16 persons were recruited at the Head Office
strategic plan, budget preparation, monitoring of implementation, determination of bank staff and 4 persons were employed as the support staff.
service fees, tariffs, interest rates and charges, provision of necessary financial
information to the management, divisions, departments and units. The year 2003 has been announced as the "Training Year" and the Bank staff has been
actively involved in the domestic training programs organized by the Banking Training
Treasury Division Centre and other organizations as well as in overseas training programs. For staff
The Treasury Division is in charge of implementing the assets and liabilities policy training and development over 70 million tugrugs was invested by the Bank. Over 100
approved by the Bank Assets and Liabilities Committee, ensuring and making efficient of the bank staff have participated in the training programs in the areas of legal
the Bank payment processing capacity and positioning optimally the funds to increase framework, marcoeconomic analysis, bank management, standardization of the banking
its profitability. Within the scope of the basic responsibilities the division is also in and financial sector, payment and settlement, accounting, banking marketing, banking
charge of developing the optimal structure of foreign currency reserve, establishing a supervision organized by the Banking Training Centre, the Ministry of Finance and
proper risk management system, participating in the bills trading, carrying out foreign Economy and other domestic institutions. Around 20 of the managing staff have been
exchange at the request of customers, and taking part within the set limits in the actively involved in training at the joint MBA Program of the Institute of Finance and
foreign currency trading. The Treasury Division is also responsible for establishing the Economics and the Handong University of Korea, training programs in financial
correspondent banking relations with other banks, promoting and expanding the Bank management, international housing financial system, management training, banking
external relations, providing services related to foreign trade such as letter of credit, management and marketing in Sweden, Malaysia, Luxembourg, USA and Taiwan. In
guarantee and money order as well as cooperating with other international banking and addition in-house training was organized for the Bank staff in English language training,
financial institutions and other organizations in the area of funding and liquidity bank products and services, corporate culture and skills, introduction to new procedures
management. and instructions. Also the student scientific conferences were organized with the
support of the Golomt Bank and students were assisted with provision of background
Supports Division materials and preparation of scientific works and reports.
Supports Division within the scope of its basic activities is in charge of efficient
execution and settlement of all types of bank payments according to the related The system of transferring knowledge and skills by the staff participated in training
procedures and instructions, compilation and preparation of the supporting documents programs to the other staff and using on-job training methods have been very fruitful
and information for the accounting. The division is also in charge of the following and useful for daily work.
activities:
The Bank strives to keep the employees healthy and to develop a corporate culture. In
to introduce information technology in the banking operations, to coordinate the 2003 the Bank organized many sporting events, in which approximately 900 employees
information flow between different divisions and units, to provide information related have actively participated and over 10 thousand tugrugs was spent.
to the daily and strategic planning activities, to create conditions for proper
operation of information technology, software system and their further updating and
renewal.
to ensure and create conditions for the Bank units to carry out activities within the
legal framework, to develop legal procedures, instructions and agreements, to
monitor and supervise, to represent the Bank in the legally related matters.
to ensure security of the Bank operations, to organize the registry, the
correspondence flow of documents, filing and archiving, to create necessary
working conditions for bank units, to provide them with necessary transport,
material and technical facilities.
25
"Internet banking", "Electronic banking" software programs have been initiated and
introduced by the Golomt Bank, as a new service to the customers, current and
savings deposit holders, individuals and organizations.
The Bodi Tower Golomt Bank works to the benefit of social development and the wellbeing
"The Bodi Tower" complex is our major real estate investment in the Mongolia of children
economy and the construction sector. The complex has a unique and creative We have actively participated in the development of Ulaanbaatar and have
construction design and system, which enables it to provide finest conditions for the contributed 101 million tugrugs to the city investment and productivity.
inhabitants.
We support the cultural and sporting activities directed to the benefit and wellbeing of
In 2003 "The Bodi Tower" complex, a combination of the modern and classic design children, cooperating actively and donating to the development activities of different
has been commissioned and officially opened. The complex has started a new page not organizations as well as universities and institutes. The organizations with which we
only in the history of the Golomt Bank but also in the productive activity of Ulaanbaatar. have been actively cooperating include the Mongolian Handball Union, the Art Council
It should be especially mentioned here that the complex, of which construction work of Mongolia and the World Vision. Within the framework of the Ulaanbaatar year of
had started in February 2001 and completed in October 2003, has become a symbol of investment and productive work we have started the operation of "the Bodi Tower"
the Bank's future stable operations and growth as well as the biggest investment. It is complex as well as we contributing to the Ulaanbaatar city development fund by
the result of joint collaboration between the Bank shareholders and the management donating 101 million tugrugs.
team. The complex was built with the most modern facilities, communication and
information systems are provided with high speed channels, heating, airconditioning, Golomt Bank for the benefit and wellbeing of children.
electricity, water supply are programmed and fully automated, security and alarm We have paid special attention to the benefit and the future wellbeing of children, which
systems are remote and distance sensitive, and there is a smoke control system. The is a main indicator of social development. In the past year the Golomt Bank has
professionals made assessment of the building, as "an intelligent construction system". concluded an agreement with the World Vision, an organization which carries out
actitivities to the benefit of children in Mongolia. The World Vision was chosen amongst
The construction design and work has been other non-governmental organizations in Mongolia and it has been agreed to cooperate
executed jointly by the Korean "AUM&Lee and to support the activities aimed to the benefit and well-being of children. Within the
architectic associates", "Uniworks" and the scope of this cooperation on the Mother and Children Day we have opened the savings
Mongolian and Russian joint "Incon" company. accounts for 75 orphans and poor children. Also the Golomt Bank has sponsored "the
Also architect U. Ganbold, awarded by the Smiling child" national assembly organized by the World Vision under the "Children in
prize of the Mongolian Union of Architects, difficult circumstances" program. The Golomt Bank has given also presents to the
engineers-consultants B. Baasanjav, A.Tsogt, participants of the assembly.
A,Tsogtjav, E.Battzorig have contributed their
outstanding knowledge and skills to the Children were very happy and we still continue to receive the letters of gratitude from
construction of the building. One part of the participants. In addition in order to make contribution to the benefit and wellbeing of the
complex is the building of the Golomt Bank Mongolian children on a continuing basis we have created a new type of savings
Head Office. The building has a very account titled "the Golden key", in which a certain amount of the accrued interest rate
convenient and necessary facilities for on the savings will be contributed and donated to the childrens fund.
customers and the working conditions for the
bank staff meets all the modern banking
construction standards. The Bank Head Office
building provides with all faciltities for meeting
with customers and clients with 5 meeting and
conference rooms, which ensures the
confidentiality and convenience for customers
and clients.
29 30
The Golomt Bank has given presents to children, "the Golden key" new savings deposit
holders as well as to children savings deposit owners whose deposit amount reached a
certain threshold. The children were greatly pleased.
31
to pass through the Mongolian and Chinese customs and border points without any
limitations and obstacles.
to transfer funds from and to the card as well as to transfer the funds from
Mongolia to the owner of the card who travels in China.
the card is not expensive and provides you with the facility to make cash and non-
cash payments with less cost as well as enables to manage and control your funds.
the card expiry period is not given, thus it is not necessary to renew the card.
only with assistance of your confidential PIN code number it is possible to make
payments, thus security and protection is fully ensured.
33 34
Lending As a result during the last year total loans amounting to 6.6 billion tugrugs were
In the reporting period the Bank paid special attention to the quality of loan products. disbursed through the Bank Branch Offices.
The Bank has initiated the loans for housing, financed from its own and project
sources, small size credits have been increased and credit services via card have been The Golomt Bank has been selected to participate in the ADB funded Housing
activated. development project. Under the project individuals were lent the funds for the period of
10 years with annual 12% interest rate starting from May 2003. Also the Bank has
In 2003 the Golomt Bank disbursed loans amounting to 90.8 billion tugrugs and started to disburse loans for housing from its own sources to individuals and companies.
received loan repayment of 78.5 billion tugrugs. The total amount of loan portfolio These loans were disbursed also in Orkhon aimag through the Bank Branch Offices. The
reached 46.8 billion tugrugs by year-end. In comparison with the last year loan loans amounting to 546 million tugrugs were disbursed to 50 borrowers for purchase of
disbursement increased 11.3 %, loan portfolio growth was 44,7%, thus rising the condominiums, building of houses or improvement of housing conditions last year.
market share of the Golomt Bank to 12%. Out of total loans disbursed 97.3% was
financed from its own resources and 2.7% was financed from project resources. The
percentage of total loans disbursed to the industrial sector was 44%.
Loans, by sectors
Other, 8%
3%, Mortgage
4%, Financial service Construction & Agriculture, 7%
3%, Health & Education
Mining, 7%
6%, Infrastructure
In addition to disbursing loans from our own sources we have implemented "The Private
Sector Development Project" in cooperation with the World Bank and the Government
of Mongolia, the ADB "Employment Generation Project" and "Housing Development
Project" and we have paid special attention to introducing to the market the cost
reduction of our loan products. During the past period we have also introduced to the
market our several new products and we have pursuing a policy of increasing the share
of some products in the total loan portfolio.
In order to support the financial sector development and to promote small businesses
loans were made to the non-banking financial institutions and the savings and credit
cooperatives.
Under "the Private Sector Development" project 4 subproject were selected and over Guided with the objective "to enable each person with permanent income the right to
642 million tugrugs loans were disbursed as well as employment generating projects borrow" the Bank has issued international credit cards to 92 individuals and over 1000
loans amounting to 1 billion tugrugs were lent to 150 borrowers with the creation of people were issued domestic credit cards amounting to 499.5 million tugrugs. In order
700 new jobs. to finance the short-tem financial needs of the cardholders the installment credit (with
permanent charges) has been introduced and credits were allotted to 130 customers
Guided by objective to increase loans disbursement and make credits approachable to amounting to 33.5 million tugrugs. Also within the scope of the card service
small businesses the Bank Branch Offices authority to disburse loans has been agreements with different business entities the disbursement of business loans has
increased and loans disbursement through Branch Offices has been intensified. been initiated.
35 36
Number Growth
Total number of organizations receiving wages and salaries
with use of cards Over 120 182%
Total number of cash card holders Appr. 7300 150%
37 38
Credit advice: to provide advice on business credit, housing credit, project credit and
all information related to credit.
Golomt Bank internet banking is protected by Cisco and Thawte security systems and it
provides high confidentiality and, prevents from any unauthorized access.
Electronic banking
Electronic banking was designed in such a way that it suits more the needs of larger
sized companies and organizations in which transactions are made with a limited
Financial Report
number of authorized signatures as well as it meets efficiently daily demands to settle
payments.
Organizations are able to make payments without going to the bank and using a special
program software, which saves time, resources as well as ensuring security. Currently
over 100 companies use electronic banking software and apply electronic payment
system automatically without going to the bank.
Moreover the phone line and electronic signature of the organization are checked each 6
months by the Bank as well as payments requested by e-mail are also monitored on a
daily basis and provide high security protection.
It should be mentioned here that on-line banking is one of our products and services.
This service is important that it provides a facility to make transactions and payments
through any Branch office or execute your payment or transaction within a short period
of time. For instance, the interbank payment and interbranch payment is executed within
10 minutes.
Performance ratios
Deposits Golomt Bank fulfilled the prudential requirements by the Bank of Mongolia and it
In 2003 the Golomt Bank customer deposits reached MNT 104.3 billion, an increase of demonstrated the following performance ratios. The return on assets declined to
MNT 30,7 billion or 41.7% over the previous year. By the end of the year 25.2% of the 0.96% or by 0.07 points, compared with the previous year. Cost to income ratio
total liabilities was current deposits, 64.2% - savings deposits and 10.6% - banking and increased to 85.2% or by 1.4 points. It can be explained by the factor that during the
non-banking institutions deposits. Although there was strong competition in the market, course of the year the bank decreased its lending rates whereas the the bank borrowing
the Bank interest rates for current and savings deposits were not changed. rates remained unchanged. Return on equity decreased to 11.13% - a decrease by 3.25
points over the previous year due to the increase in equity at the end of the year. Net
However, as a result of several income on fees and commissions to operating income ratio increased to 29.65%, which
measures taken to meet customers' shows the trend of decreasing weight of the interest income on the total income.
(in million tugrugs)
needs and to offer high quality, efficient
2002 2003
and convenient services, the current
Current accounts 20,980.2 26,280.8 2003 2002
account deposits increased by MNT 5.3
Savings accounts 44,093.2 66,939.7 Return on assets 1.03% 0.96%
billion or 25.3% and the savings Return on equity 14,38% 11.13%
Other sources 8,529.8 11,045.8
account deposits increased by MNT Cost/Income ratio 83,80% 85.20%
22.8 billion or 51.8%. Net income on fees and commissions to operating income ratio 25.79% 29.65%
Own equity
In 2003 Golomt Bank increased its paid-up capital by MNT 3 billion, accrued profit by
MNT 1.1 billion and and its own equity reached MNT 9.8 billion, which is up by 71.8%
over the previous year.
43 44
Bank operations compared to other businesses is a high risk and dynamic business and Indices Results
its stable operations and growth are greatly dependent on ensuring the establishment Tier I risk weighted capital ratio 15.61%
and maintenance of successful risk management system. Within the framework of Required level (in percentage) 5.00%
Golomt Bank organizational restructuring in 2001, special efforts were made towards Above the required ratio -10.61%
improving the risk management and early warning system and creating a control Risk weighted capital ratio 15.61%
environment in order to meet the current banking operations requirements. Golomt Bank Required level (in percentage) 10.00%
has the following risk management structure: Above the required ratio -5.61%
Total assets last 6 months average /in thousand tugrugs / 103,972,761.2
Tier I core capital ratio 9.66%
Required level (in percentage) 5.00%
CEO
Above the required ratio -4.66%
Internal Audit
Department
The Bank had constantly fulfilled and met the prudential requirement from the Bank of
Mongolia that loans and guarantees to individual Bank shareholders, chairman of the
Financial Control Divison is in charge of supervision over the Bank operations, in-depth Board of Directors, members, executive directors, employees and their related parties'
analysis of the bank risk, development and introduction of risk management methods should not exceed 5% of the equity of the bank and that the accumulated total amount
and practices as well as submission of report and information to the management. The should be less than 20% of the equity.
Bank Credit Division is in charge of credit risk management and control, Treasury
Division is in charge of foreign exchange risk management issues and Supports Division The Bank pursued a policy of expansion and diversification of loans into different
is in charge of operating activities risk control issues. sectors of the economy on the basis of analysis of general trends of sectoral
development and economic outlook. According to the National Statistical Office
The Bank Internal Audit Department is responsible for implementing its activities preliminary estimates of economic performance for 2003 GDP reached MNT 1359.7
independently from the management, any other division and unit and is in charge of billion and economic growth rate was estimated at 3.5% in real terms due to 3.8%
supervising the Bank Head office, Branch offices, divisions and units' activities in increase in construction, trade, transport and communication sectors, 1.1% increase in
accordance with legal and regulatory requirements as well as ensuring on-site agriculture and 0.4% increase in industry. Although the industrial production had
superivison for identifying, reducing and controlling risk. developed highly intensively in the previous years, it stabilized and grew by 1.4% in
2003 due to a 0.2% increase in mining sector, 2.6% increase in manufacturing and
processing sector and 2.3% increase in energy and electricity. The growth of the real
sector of the economy created a favourable environment for further economic
develoment. However, indepth analysis and assessment of the current situation of
economic sectors and its future prospects are greatly needed.
45 46
D. Foreign currency open position 1,159 (213) 119,576 (124) 83 510 2,366 2,764,019
2003.12. 31
E. Own equity /in million tugrugs/ 10,046 10,046 10,046 10,046 10,046 10,046 10,046 10,046
Indicators MNT Foreign currency 2002
F. Risk ratio 13.5% -3.1% 13.0% -2.6% 0.8% 5.9% 27.5% 27.5%
Liquidity ratio 35% 70% 58%
Required level 18% 18% 18% Required level ±15.0% ±15.0% ±15.0% ±15.0% ±15.0% 15.0% ±40.0% ±40.0%
Above required ratio -17% - 52% - 40% Unfulfilled percentage -1.5% -18.1% -2.0% -17.6% -14.2% -9.1% -12.5% -12.5%
Exchange rate of the BOM 1,168 1,460 10.92 2,073 935.70 1,168 1,168
Other liquidity ratios internally monitored were as follows at the year end:
In order to prevent any risks related to the legal and regulatory framework the Bank legal
3. Market risk advisor reviews and imposes control on the agreements and documentations from the
In 2003 the competition in the banking and financial market was intensive. In the legal point of view.
conditions of mounted competition banks, non-banking financial institutions and credit
and savings cooperatives continued to reduce the interest rates on loans and increased Taking into consideration full automatization of the banking operations, online
interest rates on deposits in the course of 2003. These trends have affected accounting and transaction processess, internet banking and increasing information
significantly the level of market average interest rate. The Bank closely monitored the technology risk, special measures were taken to ensure the full utilization of the
interest rate developments at the market and periodically adjusted the interest rates on information system at the high professional level, protection of the computer network
long-term time deposits and pursued a policy of controlling interest rate risk by from outside interference, provision of security and confidentiality for the customers and
sustaining optimal ratios between interest bearing assets and liabilities. the Bank, prevention of professional types of crime and improvement of internal security
system.
In the second half of 2003 the world economic situation improved and US trade deficit
and budget deficit widened. These developments led to US Dollar depreciation against
other currencies. The fall of US dollar did not have a significant impact due to limited
exposure to other major currencies as well as hedging and protection policy. We
received on a timely basis the market information and made forecasts of exchange rates
to manage and control risk. The Bank's exposure to foreign currency exchange risk by
major currencies are as follows by year-end:
48
Income Statement
We have audited the accompanying financial statements of Golomt Bank of Mongolia LLC as at 31 Interest income 4 10,156,803 6,820,549
December 2003 set out on pages 3 to 36. These financial statements are the responsibility of the
Bank's directors. Our responsibility is to express an opinion on these financial statements based on Interest expense 5 (5,466,216) (3,807,522)
our audit.
Net interest income 4,690,587 3,013,027
We conducted our audit in accordance with applicable International Standards on Auditing. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether Non-interest income 6 2,249,632 1,973,259
the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also Operating profit 6,940,219 4,986,286
includes assessing the accounting principles used and significant estimates made by the directors, as
well as evaluating the overall presentation of the financial statements. We believe that our audit Operating expenses 7 (3,703,999) (2,306,321)
provides a reasonable basis for our opinion.
Profit before provisions 3,236,220 2,679,965
In our opinion, the financial statements have been properly drawn up in accordance with applicable
International Financial Reporting Standards and the Regulations issued by Bank of Mongolia so as to Provisions 8 (1,399,917) (1,255,440)
give a true and fair view of the financial position of the Bank as of 31 December 2003 and of the
results and the cash flows for the year then ended. Profit before taxation 1,836,303 1,424,525
Ulaanbaatar
18 March 2004
Cash and short term funds 10 5,252,245 3,814,560 At 1 January 2002 2,071,700 798,404 2,870,104
Deposits and placements with other banks
and financial institutions 11 46,668,373 29,200,216 Profit for the year - 819,976 819,976
Investment in securities 12 9,276,445 10,695,667
Loans and advances 13 46,788,774 32,337,372 Issue of shares 2,011,530 - 2,011,530
Other assets 14 3,662,109 1,011,673
Tax recoverable 15 20,261 - At 31 December 2002 4,083,230 1,618,380 5,701,610
Property, plant and equipment 16 2,390,869 2,245,312
Total assets 114,059,076 79,304,800 Profit for the year - 1,089,381 1,089,381
Deposits from customers 17 93,220,499 65,073,394 At 31 December 2003 7,084,990 2,707,761 9,792,751
Deposits and placements of other banks
and financial institutions 18 1,683,465 893,795
Loans from Bank of Mongolia 19 1,074,000 1,024,000
Government loan 20 320,000 170,000
Loans from foreign financial institutions 21 6,498,162 5,721,374
Other liabilities 22 1,470,199 683,379
Provision for taxation - 37,248
Total liabilities 104,266,325 73,603,190
Equity
The accompanying notes form an integral part of the financial statements. The accompanying notes form an integral part of the financial statements.
6 7
The principal exchange rates used for every unit of foreign currency ruling at the balance sheet
The Bank is a limited liability company, incorporated and domiciled in Mongolia. The registered
date used are as follows:
address and the principal place of business of the Bank is Sukhbaatar Square 3, Ulaanbaatar
210620A, Mongolia.
2003 2002
The holding company of the Bank is Bodi International Limited, a company incorporated in United States Dollar 1,168.00 1,125.00
Mongolia. Great Britain Pound 2,073.40 1,804.00
European Euro 1,460.20 1,169.40
These financial statements of the Bank for the year ended 31 December 2003 were authorised for Japanese Yen 10.92 9.38
issue by the Board of Directors in accordance with a resolution of the directors on 18 March Swiss Francs 935.70 804.00
2004.
2. Basis of preparation
d. Loans and Advances and Provision for Loan Loss
These financial statements have been prepared in accordance with applicable International
Loans originated by the Bank by providing money directly to the borrower at draw down are
Financial Reporting Standards and the Regulations issued by Bank of Mongolia.
categorised as loans and advances. Third party expenses, such as legal fees, incurred in securing
a loan are treated as part of the cost of the transaction.
The financial statements have been prepared under the historical cost convention. The reporting
currency used in the financial statements is the Mongolian Togrog, which is denoted by the
All loans and advances are recognised when cash is advanced to borrowers.
symbol MNT, shown rounded to the nearest thousand.
Provisions for loan loss are made as considered necessary having regard to both specific and
3. Significant accounting policies
general factors. In determining the need for provisions, management considers, among other
things, the financial position of the borrowers, the value of any collateral and guarantees received,
a. Interest Income and Expense
industry performance, current economic conditions and past experiences. Provisions made during
Interest income and expense are recognised in the income statement for all interest bearing
the year are charged against the income statement.
instruments on an accrual basis using the effective yield method based on the actual purchase
price. The recognition of interest income is suspended when loans are outstanding for more
The maturity of the loan portfolio is presented in Note 13 which shows the remaining period of
than ninety days, in accordance with the requirements of Bank of Mongolia. On
loans from the balance sheet date to the contractual maturity. Long-term credits are generally not
commencement of suspension, previously accrued interest not received is clawed-back.
available in Mongolia except for programs set up by international financial institutions and under
Recognition of interest subsequent to suspension is on a cash basis. Interest recognition will
government financing arrangements. However, in the Mongolian marketplace, short-term credits
resume on an accruals basis when the uncertainties surrounding the recoverability are
are granted with the expectation of renewing the loans at maturity.
removed and the loan is reclassified as performing.
e. Taxation
b. Fee and Commission Income
The Bank provides for income tax based on its income for financial reporting purposes, adjusted
Fee and commission income are generally recognised on an accrual basis when the service
for items which are not assessable or deductible for income tax purpose, in accordance with the
has been provided. Types of fees and commission income derived by the Bank relate mainly to
regulations of the Mongolian Government and is measured using the tax rates that have been
deposit box fees, loan processing fees, current account withdrawal fees, and money transfer
enacted at the balance sheet date.
commissions.
10 11
Government bonds and Securities and Bank of Mongolia Treasury Bills are stated at cost adjusted An impairment loss is charged to the income statement immediately, unless the asset is carried at
for amortisation of premiums or accretion of discounts, where applicable, to maturity dates. revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to
the extent of any available previously recognised revaluation surplus for the same asset. Reversal
Quoted investments are stated at the lower of cost and market value. of impairment losses recognised in prior years is recorded when there is an indication that the
impairment losses recognised for the asset no longer exist or have decreased.
Unquoted investments are stated at cost and where applicable, adjusted for amortisation of
premiums or accretion of discounts to maturity dates. Provision is made for diminution in value k. Sale and Repurchase Agreements
which is other than temporary. Securities sold subject to a linked repurchase agreements ('repos') are retained in the financial
statements as trading or investments securities and the counterparty liability is included in
On disposal of the investment securities, the differences between the net disposal proceeds amounts due to other financial instituitions or as appropriate. Securities purchased under
and their carrying amounts are charged or credited to the income statement. agreement to resell ('reverse repos') are recorded as amount due from other financial instituitions
or as appropriate. The difference between sale and repurchase price is treated as interest and
h. Property, Plant and Equipment accrued over the life of the repo agreements using the effective yield method.
Property, plant and equipment are stated at cost less accumulated depreciation and
impairment losses. The policy for the recognition and measurement of impairment losses is in l. Employee Benefits
accordance with Note 3 (j).
(I) Short Term Benefits
The estimated useful lives used by the Bank are as follows :- Wages, salaries and other salary related expenses are recognised as an expense in the year in
which the associated services are rendered by employees of the Bank. Short term
accumulating compensated absences such as paid annual leave are recognised when services
2003 2002
rendered by employees that increase their entitlement to future compensated absences, and
Buildings 40 years 40 years
short term non-accumulating compensated absences such as sick leave are recognised when
Office equipment and vehicles 10 years 2 - 10 years
absences occur.
Computers 5 years 4 - 10 years
4. Interest income
2003 2002
MNT '000 MNT '000
Loans and advances 9,326,074 6,091,956
Deposits and placements with other
banks and financial institutions 247,726 218,157
Bank of Mongolia Treasury Bills 520,546 477,622
Government bonds and Securities 62,457 32,814
10,156,803 6,820,549
14 15
2003 2002
The average number of persons employed by the Bank during the year was made up as follows: MNT '000 MNT '000
Income tax at statutory rates based on profit before taxation 709,521 544,810
Tax exempt income (24,982) (13,126)
2003 2002 Non-deductible expenses 62,647 51,895
Directors and head of departments 22 22 (Over)/underprovision in prior year (264) 20,970
Officers 218 164 Tax expense for the year 746,922 604,549
Clerks 31 27
271 213 Management believes that the Bank is in substantial compliance with the tax laws affecting its
Of which: operations.
- Head office 130 110
- Branches 141 103 10.Cash and short term funds
271 213
2003 2002
MNT '000 MNT '000
8. Provisions Cash and bank balances denominated in local currencies 2,379,209 1,890,379
Cash and bank balances denominated in foreign currencies 2,873,036 1,924,181
2003 2003 5,252,245 3,814,560
MNT '000 MNT '000
Provision for loan losses less writebacks 1,374,489 1,255,440
Provision for investment securities 5,840 -
Provision for other assets 19,588 -
1,399,917 1,255,440
16 17
11. Deposits and placements with other banks and financial institutions 13.Loans and advances
Movements in the non-performing loans ("NPL") are as follows: At 31 December 2003, all loans and advances to borrowers are denominated in Togrog except for
USD loans amounting to MNT25,720 million. Interest rate ranges from 6% to 42% per annum
2003 2002 (2002 : 6% to 42% per annum).
MNT '000 MNT '000
Balance at beginning of year 6,099,950 5,054,748 Loans and advances amounting to approximately MNT46,924 million at 31 December 2003
NPL during the year - gross 4,016,439 8,017,423 (2002 : MNT30,153 million) were classified as normal and provided with a 1% loss reserve.
Recoveries/regularised during the year (5,073,776) (6,582,056) Further, loans amounting MNT5,160 million as at 31 December 2003 (2002 : MNT6,100 million)
Amount written off - (395,519) were classified as NPLs and provisions of MNT4,826 million (2002 : MNT3,625 million) have
Exchange difference 117,374 5,354 been allocated against these NPLs.
Gross balance at end of year 5,159,987 6,099,950
Less: Specific provision (4,825,717) (3,624,774) The provision for possible loan losses is considered adequate by the management based upon
their formal review and analysis of existing credits using their knowledge of prevailing and
Net balance at year end 334,270 2,475,176 anticipated economic conditions.
Gross NPL ratio as a percentage of gross total loans 9.9% 16.8% 14.Other assets
Net NPL ratio as a percentage of net total loans 0.7% 7.7% 2003 2002
MNT '000 MNT '000
Prepaid expenses 3,217,942 479,918
Movements in the provision for loan losses are as follows: Consumables and other inventory 232,911 124,037
Land held for sale 239,797
2003 2002 Other receivables 280,784 219,386
MNT '000 MNT '000 3,731,637 1,063,138
Specific Provision Less: Provision for other assets (69,528) (51,465)
Balance at beginning of year 3,624,774 2,857,463 Net balance of other assets 3,662,109 1,011,673
Provision made during the year 1,395,974 1,162,240
Amount written back in respect of recoveries (200,008) -
Amount written off - (395,519) 15.Tax recoverable
Exchange difference 4,977 590
Balance at end of year 4,825,717 3,624,774 2003 2002
Tax recoverable MNT '000 MNT '000
20,261 -
2003 2002
MNT '000 MNT '000 Tax recoverable represents the excess of tax paid compared to the taxation payable and is
General Provision subject to the approval from the Mongolian Tax Authority ("MTA").
Balance at beginning of year 290,554 193,280
Provision made during the year 178,523 93,200
Exchange difference 27 4,074
Balance at end of year 469,104 290,554
20 21
Buildings Leasehold Office Construction Total (i) The maturity structure of time deposits from customers is as follows:
improvements equipment in progress
and vehicles 2003 2002
MNT '000 MNT '000 MNT '000 MNT'000 MNT '000 MNT '000 MNT '000
At cost Due within six months 31,512,785 25,668,573
Balance at beginning of year 1,007,494 30,538 1,638,021 269,751 2,945,804 Six months to one year 6,734,583 865,917
Additions - - 396,683 181,410 578,093 One year to three years 6,669,997 1,711,388
Disposals - - (6,789) - (6,789) 44,917,365 28,245,878
Transfers - - 335,405 (335,405) -
Adjustment (18,099) (18,099)
Write-offs - - (16,232) - (16,232) (ii) The deposits are sourced from the following customers:
Balance at end of year 1,007,494 30,538 2,347,088 97,657 3,482,777
2003 2002
MNT '000 MNT '000
Accumulated depreciation Business enterprises 20,045,851 1,447,076
Balance at beginning of year 96,918 9,840 593,734 - 700,492 Individuals 71,282,111 62,745,421
Charge for the year 54,621 3,054 352,100 - 409,775 Government 1,892,537 880,897
Disposals - - (4,137) - (4,137) 93,220,499 65,073,394
Write-offs - - (14,222) - (14,222)
Balance at end of year 151,539 12,894 927,475 - 1,091,908
Current account and other deposits generally bear no interest, however for depositors maintaining
Net Book Value current account balance above a precribed limit,interest is provided at annual rates of
approximately 1.2% (2002: 1.2%) per annum and between 3.0% to 3.6% (2002: 3.0% to
At 31 December 2003 855,955 17,644 1,419,613 97,657 2,390,869 3.6%) per annum for foreign currency and local currency accounts respectively.
At 31 December 2002 910,576 20,698 1,044,287 269,751 2,245,312 Foreign currency demand deposits bear interest at an annual rate of approximately 3.6% (2002:
3.6%) per annum, while local currency demand deposits at approximately 7.2% (2002: 7.2%)
Depreciation charge for 2002 15,544 3,054 263,410 - 282,008 per annum.
Interest rates for time deposits vary for different types of accounts. Foreign currency time
17.Deposits from customers deposits bear interest at an annual rate of approximately 0.7% to 7.2% (2002: 0.7% to 7.2%)
per annum, while for local currency time deposits, at a range of approximately 1.3% to 14.4%
2003 2002 (2002: 1.2% to 14.4%) per annum.
MNT '000 MNT '000
Current account deposits 26,280,795 20,980,163 Foreign currency government deposits bear interest at an annual interest at 6.0% to 7.2% (2002:
Demand account deposits 19,291,117 14,285,001 6.0% to 7.2%) per annum, while local currency government deposits, at a range of 12.0% to
Time deposits 44,917,365 28,245,878 14.4% (2002: 12.0% to 14.4%) per annum.
Government deposits 1,892,537 880,897
Other deposits 838,685 681,455
93,220,499 65,073,394
22 23
18.Deposits and placements of other banks and financial institutions 21.Loans from foreign financial institutions (contd.)
The interest rate of the loan is fixed at 6% (2002: 6%) per annum. The loan is repayable within a Asian Development Bank
year in accordance to the repayment schedule. The loan from the Asian Development Bank was obtained during the year. The loan were
subsequently disbursed to housing loan borrowers. The interest rate on the loans is between 8%
to 8.2% (2002: nil) per annum. Terms of repayment of the loan are in accordance with the
21. Loans from foreign financial institutions respective repayment schedule.
2003 2002 The Bank's concentration of assets and liabilities are as follows:
MNT '000 MNT '000
At the beginning of the year 4,083,230 2,071,700 2003 (MNT'000)
Issued during the year 3,001,760 2,011,530 Foreign
At the end of the year 7,084,990 4,083,230 MNT currencies Total
Assets
At 31 December 2003 the statutory fund was wholly owned by Bodi International Limited. Cash and short term funds 2,379,209 2,873,036 5,252,245
Deposits and placements with other banks and
financial institutions 1,727,290 44,941,083 46,668,373
24.Risk management policies Investment in securities 8,734,727 541,718 9,276,445
Loans and advances 18,919,482 27,869,292 46,788,774
Management of risk is fundamental to the banking business and is an essential element of the Other assets 3,257,406 404,703 3,662,109
Bank's operations. The main risks inherent to the Bank's operations are those related to credit Tax recoverable 20,261 - 20,261
exposures, liquidity and market movements in interest rates and foreign exchange rates. A Property, plant and equipment 1,883,607 507,262 2,390,869
description of the Bank's risk management policies in relation to those risks are as follows: 36,921,982 77,137,094 114,059,076
Liabilities
Credit risk Deposits from customers 32,213,755 61,006,744 93,220,499
The Bank is exposed to credit risk which is the risk that a counter party will be unable to pay Deposits and placements of other banks and
amounts in full when due. The Bank structures the levels of credit risk it undertakes by placing financial institutions 304,271 1,379,194 1,683,465
limits on the amount of risk accepted in relation to one borrower, or group of borrowers, and to Loans from Bank of Mongolia 1,074,000 - 1,074,000
industry segments. Such risks are monitored on a revolving basis and subject to an annual or Government loan 320,000 - 320,000
more frequent review. Limits on the level of credit risk by borrower and product are approved Loans from foreign financial institutions 2,602,212 3,895,950 6,498,162
regularly by the Bank's management team. Other liabilities 5,926 1,464,273 1,470,199
Provision for taxation - - -
Exposure to credit risk is managed through regular analysis of the ability of borrowers and 36,520,164 67,746,161 104,266,325
potential borrowers to meet interest and capital repayment obligations and by changing these
lending limits where appropriate. Exposure to credit risk is also managed in part by obtaining Net position 401,818 9,390,933 9,792,751
collaterals.
Commitments and other off balance sheet items 558,576 12,160,267 12,718,843
Apart from deposits and placements with other bank financial instituitions amounting to MNT36.1
billion (2002: MNT21.0 billion) and property, plant and equipment amounting to MNT507 million
(2002: MNT523 million), all banking assets and liabilities were geographically concentrated in
Mongolia.
Currency risk
The Bank is exposed to effects of fluctuations in the prevailing foreign currency exchange rates on
its financial position and cash flows. The Bank's management sets limits on the level of exposure
by currencies (primarily USD) and in total.
26 27
2002 (MNT'000) The contractual maturities of banking assets and liabilities for the year ended 31 December 2003
Foreign are as follows (MNT '000):
MNT currencies Total
Assets Less than 3 to 6 6 months 1 to Over
Cash and short term funds 1,890,379 1,924,181 3,814,560 3 months months to 1 year 5 years 5 years Total
Deposits and placements with other banks and Assets
financial institutions 2,083,765 27,116,451 29,200,216 Cash and short term funds 5,252,245 - - - - 5,252,245
Investment in securities 10,695,667 - 10,695,667 Deposits and placements
Loans and advances 14,556,919 17,780,453 32,337,372 with other banks and
Other assets 912,295 99,378 1,011,673 financial institutions 39,795,061 6,552,000 314,304 7,008 - 46,668,373
Property, plant and equipment 1,722,561 522,751 2,245,312 Investment in securities 8,734,727 541,718 - - - 9,276,445
31,861,586 47,443,214 79,304,800 Loans and advances 15,969,538 7,839,286 14,447,244 7,280,489 1,252,217 46,788,774
Liabilities Other assets 3,662,109 - - - - 3,662,109
Deposits from customers 24,827,657 40,245,737 65,073,394 Tax recoverable - - 20,261 - - 20,261
Deposits and placements of other banks and Property, plant and
financial institutions 740,412 153,383 893,795 equipment 240 85 21,238 902,256 1,467,050 2,390,869
Loans from Bank of Mongolia - 1,024,000 1,024,000 73,413,920 14,933,089 14,803,047 8,189,753 2,719,267 114,059,076
Government loan 170,000 - 170,000 Liabilities
Loans from foreign financial institutions 3,838,719 1,882,655 5,721,374 Deposits from customers 49,457,021 30,358,898 6,734,583 6,669,997 - 93,220,499
Other liabilities 56,820 626,559 683,379 Deposits and placements
Provision for taxation 37,248 - 37,248 of other banks and
29,670,856 43,932,334 73,603,190 financial institutions 1,099,465 - - 584,000 - 1,683,465
Loan from Bank
Net position 2,190,730 3,510,880 5,701,610 of Mongolia - - 772,800 301,200 - 1,074,000
Government loan - 320,000 - - - 320,000
Commitments and other off balance sheet items 1,282,202 4,349,955 5,632,157 Loans from foreign
financial instituitions 317,110 335,220 386,312 4,047,687 1,411,833 6,498,162
Other liabilities 1,470,199 - - - - 1,470,199
Liquidity risk 52,343,795 31,014,118 7,893,695 11,602,884 1,411,833 104,266,325
The Bank is exposed to frequent calls on its available cash resources from demand deposits,
maturing deposits and loan drawdowns. The Bank maintains liquidity management with the Net liquidity gap 21,070,125 (16,081,029) 6,909,352 (3,413,131) 1,307,434 9,792,751
objective of ensuring that funds will be available at all times to honor all cash flow obligations as
they become due. The Reserve department sets limits on the minimum proportion of maturing Accumulated gap 21,070,125 4,989,096 11,898,448 8,485,317 9,792,751
funds available to cover such cash outflows and on the minimum level of interbank and other
borrowing facilities that should be in place to cover withdrawals at unexpected levels of demand.
28 29
The contractual maturities of banking assets and liabilities for the year ended 31 December 2002 Interest rate risk
are as follows (MNT '000): The Bank is exposed to the effects of fluctuations in the prevailing levels of market interest rates
on its financial position and cash flows. Interest rate risk is measured by the extent to which
Less than 3 to 6 6 months 1 to Over changes in market interest rates impact margins and net income. To the extent the term structure
3 months months to 1 year 5 years 5 years Total of interest bearing assets differs from that of liabilities, net of interest income will increase or
Assets decrease as a result of movements in interest rates. The Bank's expected repricing and maturity
Cash and short term funds 3,814,560 - - - - 3,814,560 dates do not differ significantly from the contract dates, which are disclosed in the liquidity risk
Deposits and placements table above.
with other banks and
financial institutions 18,189,050 575,151 8,075,068 2,360,947 - 29,200,216 Interest rate risk is managed by increasing or decreasing positions within limits specified by the
Investment in securities 10,545,667 150,000 - - - 10,695,667 Bank's management. These limits restrict the potential effect of movements in interest rates on
Loans and advances 6,151,180 5,911,078 11,677,674 8,488,761 108,679 32,337,372 interest margin and on the value of interest sensitive assets and liabilities.
Other assets 1,011,673 - - - - 1,011,673
Property, plant and The Bank's interest rate policy is reviewed and approved by the Reserve department. The Bank's
equipment 370 2,207 28,654 622,367 1,591,714 2,245,312 average effective interest rates per annum in 2003 and 2002 for monetary financial instruments
39,712,500 6,638,436 19,781,396 11,472,075 1,700,393 79,304,800 are as follows:
Parties are considered to be related if one party has the ability to control the other party or 2003 2002
exercise significant influence over the other party in making financial or operational decisions. The MNT '000 MNT '000
Bank is controlled by Bodi International Limited which owns 100% of the Bank. d) Rental of garage to:
A number of banking transactions are entered into with related parties in the normal course of Bodicom Co.Limited 544 607
business. These include loans, deposits and foreign currency transactions. These transactions were Smartcard Co.Limited. 544 607
carried out on commercial terms and at market rates. The volumes of related party transactions, MPC Co.Limited 544 607
outstanding balances as at the year end, and relating expense for the year are listed below. Bodi Insurance Co.Limited 712 607
EBG Properties Co.Limited 544 607
As at 31 December, balances with related parties included: 2,888 3,035
26.Capital adequacy (contd.) 27.Commitments and off balance sheet items (contd.)
Breakdown of risk weighted assets in the various categories of risk weights are as follows: e. Foreign exchange commitments and derivatives
In the normal course of the business, the Bank enters into foreign currency exchange
2003 (MNT'000) 2002 (MNT'000) contracts with third parties. As at 31 December 2003, the Bank has 10 open positions (2002:
Assets Risk Assets Risk 2 open positions) on foreign currency exchange forward contracts worth approximately
Weighted Weighted MNT11.4 billion (2002: MNT4.7 billion).
%
0 23,420,670 - 20,873,539 - d. Other off balance sheet items.
10 - - - - At 31 December 2003, other off balance sheet items represents loans written off on
20 37,213,395 7,442,679 23,029,852 4,605,970 non-performing loans and the interest suspended.
50 21,280 10,640 13,146 6,573
100 56,292,644 56,292,644 36,345,910 35,594,357
Total 116,947,989 63,745,963 80,262,447 40,206,900 28.Fair values of financial assets and liabilities
Financial instruments comprise financial assets and financial liabilities. The fair value of a financial
27.Commitments and off balance sheet items instrument is the amount at which the instrument could be exchanged or settled between
knowledgeable and willing parties in an arm’s length transaction, other than in a forced or
a. Financial Commitments and Off Balance Sheet Items liquidation sale.
In the normal course of business, the Bank incurs certain commitments with legal recourse to
its customers. No material losses are anticipated as a result of these transactions. Almost all of the financial instruments as at 31 December 2003 are short term in nature with
maturities of less than one year. The estimated fair values of those financial assets and financial
2003 2002 liabilities as at the balance sheet date approximate their carrying amounts as shown in the
MNT '000 MNT '000 balance sheets due to the relatively short term maturity of the financial instruments.
Guarantees and letter of credits 456,781 206,099
Lease commitments 372,402 738,458
Foreign exchange commitments 11,409,051 4,687,600
Other off balance sheet items 2,284,043 -
14,522,277 5,632,157
As at 31 December 2003, the bank has one guarantee which is fully collaterised. Total value
of the guarantees amounts to approximately MNT47 million. The balance of MNT410 million
relates to 3 letter of credits which matures subsequent to year end.
b. Lease Commitments
The Bank has lease commitments in respect of various office premises, all of which are
classified as operating leases. A summary of these commitments are as follows:-
2003 2002
MNT '000 MNT '000
Within a year 103,578 108,594
More than 1 year and less than 5 years 190,856 308,382
5 years and more 77,968 321,482
372,402 738,458
34
29.Comparative figures
Certain comparative figures have been reclassified to conform with current year's presentation.
2003 2002
MNT '000 MNT '000
Assets
Liabilities
30.Subsequent event
Two letter of credits issued in favour of a defaulted borrower amounting to MNT314 million
crystallised subsequent to the year end. The amount has been recognised as a loan and a full
provision has been provided on the amount as at 31 December 2003.
31.Currency
32.Mongolian translation
These financial statements are also prepared in the Mongolian language. In the event of
discrepancies or contradictions between the English version and the Mongolian version, the
English version will prevail.