MBSL marks strong turnaround in 2021

Chairman Kanchana Ratwatte

Chief Executive Officer Dammika Hapuhinna

The Merchant Bank of Sri Lanka and Finance PLC (MBSL) has made a strong turnaround in 2O21; they have reported Rs. 812 million as Profit before Tax (PBT) for 2021, compared to a loss of Rs. 1.3 billion in 2020. 

Not only are the 2021 results the largest annual profit reported by MBSL over the last 10 years, but also reflects strong management action during one of the worst 12-month periods in recent economic history dominated by a debilitating pandemic. A turnaround in such economic circumstances demonstrates the capacity and resilience of MBSL to overcome obstacles, stay focused and manage for results.

Apart from this remarkable turnaround, MBSL passed a notable milestone in 2O21 by concluding a successful rights issue raising a sum of Rs. 2.1 billion that was added to the capital base thereby conclusively addressing issues relating to their capital adequacy ratio. Due to inadequate capital buffers, MBSL was faced with impediments including lending and deposit caps imposed by the regulator. These controls have now been removed and the company can look forward to rapid growth as the Sri Lankan economy gears for expansion.

MBSL Chairman Kanchana Ratwatte referring to the 2021 PBT said: “The current turnaround once again exhibits our resilience in the face of a tough environment. MBSL’s long term view and strategic focus on the overall business has yielded good results and we remain optimistic for this year.”

The turnaround in PBT for the year 2O21 resulted not only from sound action taken by the Government to provide appropriate funding via CBSL Loan Schemes to those affected by the pandemic but also by MBSL acting proactively to manage stress within their customer portfolio. Thus, the lending portfolio increased by 5.2% to Rs. 28 billion while the deposit base also showed an increase in growth of 2.5% to Rs. 22 billion.

The income Statement displays a resounding improvement. Gross Total income from all revenue sources was up 15% to nearly Rs. 6 billion in 2021. Net interest Income doubled in the period to Rs. 2.8 billion indicating competitive pricing as well as improving volumes. Fees, Commissions and Other Operating income increased by 173% to Rs. 385 million. Displaying strong management capacity, all operating expenses to include HR and Depreciation remained at the same level as 2O2O at Rs. 2 billion. 

impairment charges, reflecting an improving loan portfolio, recorded a significantly low charge, down from a high of Rs. 553 million in 2020 to only Rs. 74 million, a reduction of 87% in 2021. Taking all of these aspects together resulted in the strong turnaround in PBT moving from a loss of Rs. 1.3 billion in 2O2O to a profit of 812 million in 2021. 

MBSL Chief Executive Officer Dammika Hapuhinna reflecting on the 2021 turnaround in difficult circumstances said: “Our commitment to customers as well as early action paid off. We anticipated the difficulties underway within our customer portfolio and reacted quickly to minimise damage. We are now positioned for growth.”

MBSL entered the Sri Lankan financial sector as the country’s pioneer merchant/investment bank in 1982 and was quoted on the Colombo Stock Exchange in 1991. lt was subsequently registered as a licensed finance company under the Finance Business Act No. 42 of 2012 under the regulatory purview of the Central Bank of Sri Lanka. MBSL franchise extends to a wide range of customers through its key business activities which include Deposit Mobilisation, Savings, Leasing, Loans, Corporate Advisory and Capital Market Services, Gold Loans and Real Estate Finance through a widespread network of 48 branches and service centres including the head office. MBSL is a majority-owned subsidiary of the state-owned financial powerhouse, Bank of Ceylon, which holds a strategic 74% stake in the company.