This study examined to determine major factors affecting banking sector’s competitiveness and profitability and methods for evaluating competitiveness of a commercial bank. Specifically, it emphasized strength of competition in Mongolian’s banking sector and investigating possibilities of improving profitability and competitiveness of Golomt Bank.
Four hypotheses were developed with four measures of competition of commercial banks: Market Share, Market Structure or Concentration, Scale Efficiency and Productive Efficiency (X-efficiency). The econometric model equations were applied and calculations were made by Eviews and SPSS software. This study was conducted in secondary sources and empirical results provided.
The empirical results of this study indicate that profitability, X-efficiency, scale efficiency of commercial bank can positively and significantly relate to their competition. Thus, banks having higher level X-efficiency and scale efficiency display more competitiveness then those with lower costs and higher profits. Empirical results show that the most important factor affecting is the efficiency of banks.
Similarly, Mongolian banks are also evaluated based on other five criteria, that is total assets, loan and advances, deposit, liquid assets and product differentiations and results were drawn for each criterion. Empirical study on internal environment was conducted for Mongolian banks focusing on investigation of competitors and comparison with other commercial banks. The results show that during 2008, Khan bank is first bank and Golomt Bank became the second bank in Mongolia when measured by total assets, total loans and deposits. Also, The Golomt Bank became the third bank when measured by total equity and liquid assets and Khan and Trade of Development Banks became the first and second bank when measured by total equity and liquid assets.
The empirical results of this study, we can see that The Golomt bank’s major competitors are Khan Bank (ranked the first with profitability, market share and the second with scale efficiency) and Trade of Development Bank (ranked the first with scale efficiency and the second with profitability). The Golomt bank ranked the second with market share, X-efficiency and the third with profitability.

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