Strong capitalisation, resilient asset quality, and diversified SME lending support XacBank's credit profile amid Mongolia's evolving banking environment.
Fitch Ratings has affirmed XacBank JSC's Long-Term Issuer Default Ratings at 'B+' with a Stable Outlook, alongside its Viability Rating of 'b+' and Government Support Rating of 'b'.
The affirmation reflects Fitch's expectation that XacBank will maintain its intrinsic credit strength over the next one to two years, supported by Mongolia's strong economic activity, particularly in mining, infrastructure, and consumption.
Resilient Asset Quality and Strong Capital Buffers
XacBank maintains approximately 9% of Mongolia's domestic banking assets, with established strengths in SME lending, small-business finance, and leasing. Its diversified ownership structure also supports governance and oversight.
Despite rapid balance-sheet expansion in recent years, asset quality remains resilient. The impaired-loan ratio increased to 2.4% in 2025 from 2.0%, driven primarily by consumer lending, but remained the lowest among Fitch-rated local peers.
The bank's Fitch Core Capital ratio rose to 21.1% in 2025, while operating profitability remained robust at 5.7% of risk-weighted assets. Fitch expects profitability to remain above 5% over the next two years, supported by loan growth and moderate credit costs.
Funding and Growth Risks Under Monitoring
XacBank's loan-to-customer deposit ratio increased to 113% by end-2025, reflecting greater reliance on wholesale funding. International financial institutions accounted for 34% of total funding, with Fitch expecting access to remain sustainable over the medium term.
However, Fitch cautions that prolonged rapid loan growth could allow latent risks to accumulate, particularly in higher-risk consumer lending segments. High interest rates and competition for deposits are also expected to continue weighing on net interest margins.
CMM Perspective
Fitch's affirmation highlights XacBank's strong capital position, resilient asset quality, and established role in Mongolia's SME-focused banking market.
For investors, the bank's credit profile is supported by disciplined risk management and access to international institutional funding, while loan growth, funding structure, and Mongolia's broader economic environment remain important factors to monitor.
The Stable Outlook indicates Fitch's expectation that XacBank will maintain its current intrinsic credit strength over the next one to two years.
