BANKING SECTOR REVIEW: 1st quarter of year 2025

OVERREACHING LEADS TO FAILURE

The banking sector’s performance remained relatively stable and showed growth. Total assets in the sector increased by 27% compared to the same period last year. As key economic sectors began to recover, the volume of non-performing loans started to decline. The growth in bank lending aimed at supporting economic sectors continues.

Despite a balance of payments deficit, the situation is being influenced on one hand by rising imports of goods, and on the other by export revenues falling short of expectations. A drop in export income weakens the tugrik’s purchasing power and poses a risk of putting pressure on foreign exchange reserves. The sharp decline in mining exports has reduced budget revenues and created conditions for a fiscal deficit.

The recovery in agriculture, construction, and manufacturing played a key role in the 2.4% economic expansion. However, slower-than-expected growth in the mining sector negatively impacted related areas such as transportation, logistics, warehousing, and trade, slowing overall economic growth. Supply-side increases in the prices of goods and services contributed to rising inflation.

Toward the end of last year, expectations for steady economic growth and overly optimistic projections of export revenues led to a significant expansion of current expenditures and the launch of large-scale projects without prioritizing them based on economic return. Looking at the current economic conditions, this uncalculated overspending resembles the proverb, “Overambitious plans often end in disappointment.”

KEY DEVELOPMENTS AND EMERGING TRENDS IN THE BANKING SECTOR IN 2025

• The growth of loans aimed at supporting individuals and businesses continues.
• Banks’ non-performing loan portfolios have declined.
• The financial indicators of the five systemically important banks remain relatively strong.
• Publicly listed banks distributed dividends equivalent to MNT 483 billion from their 2023 profits.
• Although the banking sector’s competitiveness has improved, there is still much to be done to further enhance it.
• Confidence in the tugrik remains strong, contributing to the increase in tugrik-denominated savings.

Please click HERE to see the full version of the review in ENG.