SH. CHUDANJII President and CEO of Zoos Bank

First of all I would like to begin by asking about your company's the recent public listing. Tell us the reasons behind this public listing, and why you decided to join the Mongolian Stock Exchange.

I would also like to thank you for coming to our bank at this important time. I would say that yesterday was a historic day for our bank. We have been preparing for this event for a long time. Our bank followed the development pattern practiced around the world and became a public company. We have come to the highest stage of our development.

To answer the question 'why', I would have to give a brief introduction to our bank. ZB was established in May 1999. It was initiated by two companies, Oi Mod and Negdelj. We started our business with 400,000 Tugrugs ($300,000 USD) and a staff of 9 people. We were renting office space in the Oi Mod Company building.
It has been 7 years since we started. Now our assets total 102 billion Tugrugs (100 million USD). We have 33 branches and departments operating in 14 aimaks around the country. We employ 470 people.

Before yesterday at 11am we had 7 shareholders, now we have 250. There was one Japanese shareholder - one of the 7 shareholders. He has been cooperating with us since 2003.

Let me answer the question about why become a public company. Nowadays our stock market is not operating properly. It is very inactive. Fifteen years ago people were given vouchers - shares from state property, known as blue and pink vouchers. Time showed that it was not an optimum method for beginning stock market activity. But as time goes by, private companies operate more actively in the market and the banking sector gets stronger and we see economic growth. As result of the development of the market economy, we feel a strong need to restore the activity of the stock market. Yet the perception of stock market activity remained unchanged. People think all you have to do in the stock market is obtain the majority of stocks - more than 51 percent. That's it, you bought a company. They do not realize the responsibility behind it. We want to eliminate this practice.

We are the first commercial bank to take this step. Why? The need was a result of market needs. We wanted to lead the way for other companies towards more transparent activities on the market. By issuing shares and entering into the second market, companies selling shares will be more responsible for their activities, and financial reports will be more accurate. This is what we want, and I think all banks want this too.

Also this way we could be more secure financially. For now the only way to get money is to get loans from banks. Let's say if the market has two hands, then one hand is overloaded. The stock market doesn't operate properly so capital is concentrated around banks, that's the reason why bank interest remain high on the market.

I believe that if we become public, then company governance will improve. We think that we can become a model stock company which meets market requirements. We spent nearly 2 years preparing. We had to change the perception of stock market activity, and we did lot of promotion work.

What does this step involve in terms of accountability and requirements for your bank to deliver to shareholders? What are the requirements in Mongolia for listing a company on the stock exchange?

Requirements are high. First we had to evaluate our business. We don't have a company that rates businesses in Mongolia, we hired a professional organization to evaluate our business.

What was the name of the rating agency?

I cannot recall it now. It was a year ago. It was a professional organization. They studied our bank and our documents to protect potential shareholders from risk and release a prognosis for the future of this bank.

It strikes me as a brave move to be one of the fist banks to take this step. Do you think that other people would follow your good example?

Yes, it was a very brave step. We faced lot of difficulties as pioneers, there was a lot of uncertainty, including the legal framework. We need more laws and regulations because we have regulation inconsistency. But we are confident that competent organizations will make the necessary changes as the whole process begins because there is a need in the market.
The laws and regulations must be amended. These laws were passed for the privatization period, for an earlier period. They do not correspond to the situation today.
We are very confident in whole process. We believe many companies will follow us, including other banks. They are carefully watching our steps now. They are observing how it will proceed, what we will achieve…

What are the long-term objectives for this public listing? You've already told us about importance of reviving stock exchanges. But from the point of view of your bank, what do you hope to achieve from this public listing?

Adequate governance. Bank activities will be improved because of better monitoring. Nowadays all commercial banks are monitored by the Bank of Mongolia. By becoming a public company we have added another monitor - the Stock Exchange. Our new 200 shareholders will also be our overseers. Good monitoring for business is one of the keys to success. Now we have a National Committee for Securities and a Financial Coordination Committee.

What we will achieve is transparency in our business. First we will be accepted into the domestic market, and our long-term goal is to be accepted into the international market.

Can you tell us what your bank specializes in? What are the main focuses of your business?

We do mediation activities, financing, transfers…

What sort of projects are you going to be financing next year? What are the main activities that will take your bank forward?

We will participate in World Bank's Private Sector Development Project which was approved in February. This is part 2.

This is very important for the country.

Banks in Mongolia do not offer long term loans. Almost 78 percent of total loans are up to one year. We want to introduce loans for more than a year, let's say 2 - 3 or even more than 3 years, up to 5-year loans. There is need for long term loans, but banks are incapable to fulfill this need. We plan to provide this service.

The absence of access to capital in granting long - term loans is a serious issue. Do you hope to attract international capital in order to grant long-term loans?

It is very difficult to attract capital from abroad to a commercial bank in Mongolia for many reasons. The Mongolia's ratings are not accepted internationally. Public listing in this case is more valuable than a very famous audit company's report. Public listing puts a foundation towards attracting international capital in the long term.

We are going to attract 2 billion tugrugs through our shares. We are attracting money that circulates out of the real economic flow. We are attracting money into the economic turnover in order to grant long-term loans.

So you hope to attract this through your public listing in UB.

Not only in UB, even people in rural areas placed orders. We have branches in rural areas, so people can order shares from local branches. In fact we got many orders from the countryside. I think it is an extraordinary. Before, not just anybody could become a shareholder of a bank, but we made it possible. You can become an investor in the bank and get benefits from it.

The reason I asked about international capital was because this report is targeted at international investors. It occurred to me that this might be a focus that is important for you to talk about with the potential of international investors investing in your company.

Of course we are interested. If there are people who are interested in our bank, in investing in our company, we would be more than happy to cooperate.

We are also interested to learn about the CEO behind this bank. Tell us little bit about your connection to Zoos Bank. How long have you been here and how did you become CEO of this bank?

It is an interesting story. I was born in 1969. I studied in Irkutsk 1988-1993 at the State Agricultural University and become a finance and loan specialist. After graduation I worked as an economist in the Agricultural Bank of Mongolia. Meanwhile Zoos Bank was just getting started. They had just got their license from the Bank of Mongolia.

It was the peak of the banking crisis in Mongolia. Appointing the Executive Director of the bank happened to be very hard task. At that time many banks were bankrupt because of a failure from administration of the banks. They were 10 candidates for that position. A director of one of the founding companies, Oi Mod, approached me at Ag Bank and offered me work for this bank. I submitted my application and in two hours I was appointed to this position. It was very quick. They had to make the decision by 4 pm or they would loose their license. That same day 2 hours prior to the deadline they offered me this job.

At the beginning there was a small staff, so we were doing everything ourselves: marketing, meeting customers, PR, making reports, etc. Once a month we had to give the report to the BOM. I didn't have an assistant so I took the report myself. A guy from BOM advised me: 'you should have somebody to deliver the report'. We worked very hard. It was very hard to find customers. People were afraid of commercial banks. Several times we were 'kicked out' when we approached people to offer our services. They were saying to us: you, commercial banks will take my money away and disappear. Later the attitude improved.

I didn't plan on becoming CEO. I am not a relative of investors or I didn't have any connection to them. In this interesting circumstance I become a director of this bank.

They made a quick decision. Sometimes quick decisions are the best.

I didn't disappoint them. They are happy with their decision. The board and staff are comfortable working with me. I am happy to be in this team.

You must be very proud to have taken the bank that started with a capital of 300,000 USD to being the first publicly listed bank in Mongolia in seven years. How do you feel about this?

I am proud. Big contributions from the team, from professional organizations, and from investors have brought us here. Our team is very proud of these achievements. I am thankful to the other 17 commercial banks, our competitors. They sharpened us. Without them none of this would have been impossible. Maybe without them we could not have become a listed company.

Having achieved so much in short span of time, what do you hope to achieve in coming 5 years for example?

We have a financial plan which we hope to achieve in 5 years. We want to join the top 3 commercial banks in the domestic market. We are number 5 at the moment. Our goal in the next 3 years is to become third bank after TDB and Golomt Bank.

Through our public listing we want to attract capital from abroad and we want to boost the Mongolian economy. We want to contribute to the growth of our economy.
Banks serve the society. We have a responsibility. We strive to raise the bar.

When you say you want to enter the international market, in what capacity would you like to enter?

Once we get accepted into the domestic market, we have to work hard to become accepted internationally. Our goal is to enter into the international market in 5 years after sufficient preparation work is done. It depends on how the Stock Exchange Market develops too.

There are 17 banks in Mongolia. You said that competition was a very important factor in your success. For the benefit of our readers who don't know anything about Mongolia or its banking sector, what makes ZB different from other 16 banks here? Why are you different?

We all operate in one market so our packages of services are similar. There are things like organizational culture. Our staff is confident about their future. We have confidence. Our team has vision, and confidence in future that is one of the keys to success.
What makes us different from others? The answer is our friendly environment. This quality is noted more than any other, especially from specialists who come from other countries. Our team unifies to achieve the goals we set. In general, we have a very good attitude. I think this quality makes us successful.
Banking activity depends a lot on the human factor. Our team is our advantage.

Finally, how can I buy shares of your bank?

You can buy it now.

How do you do that in Mongolia?

You should have an account. You place your money in your account and place an order. We make an agreement and that is it. You can log onto the SEM site and see the prices of your shares.
Yesterday the price was 1000 tugrugs, today shares are sold at 1200. We think that the average price will be 1500 Tugrugs.

I wish I bought them yesterday.

Yes, but you will not loose if you buy today. Last year we had 20% of our dividend per year. We plan to keep this rate without reducing.