Golomt Bank

To our esteemed Clients, Shareholders, Business Partners and Colleagues!

It is my pleasure to report to you on Golomt Bank’s 2013 performance and 19th year of its continued success.

The world economic growth has slowed down in 2013 with 3 percent of growth and the economies of not only developed nations but also developing countries endured a slower growth. The U.S Federal Reserves implemented USD 85 billion bond-purchasing program since September 2012, however, its May 2013 notification on reducing the amount of bonds to be purchased led to the fall of prices for major commodities in the international market. Moreover, foreign direct investment declined by 6 percent worldwide.

According to IMF forecast as of January 2014, the rapid growth of PRC is expected to be slow. eceleration of Golomt Bank sustained the stable growth it was maintaining for the past 15 years, with total assets increased by 48 percent, total capital by 49 percent and net profits by 117 percent as of the end of 2013. The Bank has firmly strengthened its financial position with excellent financial performance ratios, including liquidity ratio of 43.3 percent, Return on Assets of 1.9 percent and 26.8 percent of Return on Equity, which indicate the financial strength of the Bank. economic growth in China, which is the main export partner of Mongolia, will result in the decline of China's imports as well as in the decreased volume of Mongolia’s exports.

Due to slow growth of the world economy in 2013 and decline of foreign direct investments worldwide, Mongolia’s foreign trade turnover decreased by 4.5 percent in 2013, of which, export income by 2.6 percent and import by 5.7 percent respectively. In addition, with the end of first investment stage of Oyu-Tolgoi, uncertainties surrounding its 2nd stage of investments and declining foreign direct investments worldwide, the volume of foreign investment in Mongolia fell by 54 percent in 2013.

Although the volume of foreign trade and foreign investments decreased, Mongolia raised USD 1.5 billion Chinggis Bond at the international market at the end of 52012 that supported the increase of domestic investments and sustained the high growth of the economy with real GDP at 11.7 percent in 2013.

The investment of MNT 1.7 trillion from Chinggis Bond proceeds and the Development Bank of Mongolia funds and MNT 1.2 trillion from the consolidated state budget (MNT 790 billion from the state budget) in 2013 was 1.5 times higher than investments in 2012 from the consolidated state budget and the Development Bank of Mongolia funds.

In addition, to support the economic growth and to stabilize volatility of prices of some major commodities and products, the Bank of Mongolia disbursed about MNT 3 trillion through commercial banks by implementing the “Medium Term Program to Stabilize Prices for Key Commodities and Products” and the “Program to Create Stable Housing Mortgage Financing Structure”.

Golomt Bank was actively involved in these programs as well as in the following the Government Programs to stabilize prices:

• “Subsidized rate loan designated to liquidate seasonal supply limitation for construction materials (cement and reinforcing steel), required to be imported”
• “Staple Food Price Stabilization Subprogram”
• “Subsidized rate loan subprogram to stabilize flour prices”
• “Subsidized loan subprogram to secure coal reserves, ensure preparation of fuel and energy sectors for winter and stabilize energy prices and tariffs”
• Loan programs to finance housing to support construction sector and housing supply.

The implementation of these subprograms in 2013 resulted in relatively stable prices for key consumer products including fuel, meat and flour, and Golomt Bank is pleased that it made its contribution in these programs. As a result of the implementation of price stabilization programs, the inflation rate, measured by consumer price index, by the end of 2013 was 12.5 percent nationwide and 12.3 percent in Ulaanbaatar city.

Furthermore, in cooperation with the Ministry of Industry and Agriculture and with Chingis Bond proceeds, Golomt Bank is financing technical renovation projects in 5 major sectors of the economy, which will benefit the country in the future, such as Wool, Cashmere, Greenhouses, Dairy farming and Garment sectors. With this financing, the industrialization of Mongolia will intensify opening new doors for the country to become an exporter from an importer.

Within the program to “Create sustainable mortgage financing structure”, Golomt Bank’s housing loan portfolio increased by 105 percent from MNT 248 billion in 2012 reaching MNT 510 billion in 2013, and the number of mortgage borrowers increased by 58 percent reaching 12,029 in the reporting period. In particular, Golomt Bank has been actively engaged in the “8±1 percent Housing Mortgage Program” implemented by the Government and the Bank of Mongolia by refinancing 4,828 households with MNT 131 billion and disbursing newly MNT 227 billion mortgage loans to 4,067 households, thus, the bank alone accounted for 30 percent share in the Mongolian mortgage market.

Although in the last year the economy of Mongolia did not record the expected high growth with uncertainty prevailing, the banking and financial system of Mongolia remained stable thanks to the monetary policy carried out by the state, specific measures, programs and projects implemented by the Government and the Bank of Mongolia.

In 2013, Golomt Bank was able to sustain its stable growth, which it was maintaining for the past 15 years despite this challenging environment and its financial position has strengthened with total assets increased by 48 percent reaching MNT 3.75 trillion and total capital increased by over 49 percent reaching MNT 329.7 billion while net profits increased by 117 percent reaching MNT 56.9 billion.

Moreover, the Bank’s financial ratios indicate excellent results with its liquidity ratio reaching 43.3 percent, return on assets 1.9 percent and return on equity 26.8 percent, which show the financial strength of the Bank.

Golomt Bank continues to implement its strategy to expand its branch network in high growth economic regions throughout Mongolia. Within this objective, it opened 5 new branches during this reporting period and has now in total 97 branches expanding further the size of its operations.

Golomt Bank introduced the first in the domestic market “Self-service banking” in 2012. We have expanded the scope of this service in the last year to increase the number of self-service banking units to 11 and placed 15 new ATMs to make the bank closer to its customers. As the leading bank and innovator in the banking sector, Golomt Bank has been paying a particular attention to development of its internet banking services and online banking channels to enhance the speed and security of its services. In particular, it introduced 2.0 version of SMART BANKING service, the first financial application in Mongolia for smart phones in 2013 and introduced in cooperation with the General Tax Authority of Mongolia, a new service for individuals and entities to pay their taxes online, e-Taxes, enabling the state services to become closer to its customers. We also introduced “3D SECURITY” for the credit cards in order to improve safety and security of online purchasing, which is one of many accomplishments that the Bank has had this year.

In July of 2014, Golomt Bank is working to introduce the first Core Banking System in Mongolia in cooperation with Infosys, the leading global IT Company as well as the first American Express cards in Mongolia to its customers.

In recognition of the innovations in internet banking products and services, advanced technological solutions, increase of bank customers using internet and mobile solutions, Golomt bank was awarded the “Best Internet Bank – 2013” in Mongolia by the Global Finance, a well-recognized industry journal, which selects the best banks in the international financial markets. Within its social responsibility program, Golomt Bank, in addition to supporting environmentally-friendly business project, contributes to the development of our future generation by organizing 12th Golomt Bank’s Science and Research conference for students and our Scholarship Program for students for 11th consecutive year. Moreover, in 2013 as a recognition of the banks continuous support of culture and sports, it was awarded one of the most sought after awards within the business community in Mongolia, the “EXCELLENCE IN CORPORATE SOCIAL RESPONSIBILITY”, award by the Chamber of Commerce and Industry of Mongolia.

The core value of Golomt Bank is its highly professional, creative and dedicated employees. Therefore, the Bank’s human resources policy in 2013 focused on improving skills of employees with increasing capacity to work internationally, and creating an environment to promote long-term stable employment. Golomt Bank launched HR recruitment campaign in 2013 under the slogan “Success starts with the Right Job” among newly graduates of universities; as a result, about 100 newly graduates joined our family and the number of Bank employees reached 1,728. In addition, since 2011 the Bank is implementing the Employee Stock Ownership Program (ESOP) which is not only to encourage stability and long-term employment but to also ensure a social guarantee and to provide the rights to our employees to take part in corporate governance of the Bank. An employee taking part in a Bank’s decision making process creates conditions for the corporate governance to be monitored and to be healthier.

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G.GANBOLD
Chief Executive Officer