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Wednesday, 2 July 2014 00:55 - - {{hitsCtrl.values.hits}}
The terms upon which the proposed amalgamation would take effect and the ratios upon which the shares of MBSL Savings Bank Ltd. and MCSL Financial Services Ltd. would be swapped for the shares of MBSL have been declared to the Colombo Stock Exchange consequent to the formal approval of the Board of Directors of Merchant Bank of Sri Lanka, MCSL Financial Services and MBSL Savings Bank.
With the existing strengths and capacities of MBSL, it is envisaged the proposed merger will open a whole new world of opportunities for MBSL.
MBSL has come this far by generating funds through debt instruments for its business activities. Investor confidence in the company is strong as proven by the fact that the MBSL recently raised Rs. 2 billion through a listed debenture issue, which was oversubscribed on its opening day.
However, operating within this model in the future is a tough call, said its Chairman M.R. Shah, asserting that the prolonged merger was a long-felt need, which could not have been materialised without the initiative taken by the regulator, CBSL.
He further stated: “Currently we operate in a very limited environment. This proposed merger will allow us to operate in retail credit and give us access to public deposits, etc. Additionally, in a developing economy such as Sri Lanka, we see high potential for savings and deposit growth as the per capita income increases.”
MBSL is also exploring possibilities to enter the finance market with more innovative concepts and will seek creative ways to ‘reinvent’ revenue through new service and pricing models while simplifying its operating models in ways that build greater customer loyalty.
The Chairman also observed that access to customer deposits would allow MBSL to reduce its cost of funds. “It will give more room for MBSL to be competitive in lending rates and boost its bottom line,” he said.
He said all employees of MBSL Savings Bank and MCSL Financial Services would be absorbed into the MBSL with proper training and guidance to enhance productivity and there would be no employee layoff. “This will be the third merger in Sri Lanka’s banking sector which will be carried out without any employee layoffs.”
He recalled firstly the merger between SME bank and LDB which did not lay off employees; secondly, the merger between MCSL Financial Services, a subsidiary of MBSL, and BOC and Ceylease; and thirdly the proposed merger of MBSL, MBSL Savings and MCSL Financial Services, which will not in any manner adversely affect employees.
“Employee relations pre- and post-merger are positive and the employees of both entities are looking forward to an exciting future,” observed Shah, a veteran banking sector trade unionist with 33 years of banking experience.
This merger also overcomes the capital adequacy shortfalls of the MBSL Savings Bank, which has been a major challenge of the bank since taking over the troubled Ceylinco Savings Bank.
Many administrative synergies are anticipated following the merger. Economies of scale in operating costs are also obvious.
With the merger, the overall branch network of the MBSL will be 61 and expansions thereafter are on the cards, in order to capture more business opportunities.
MBSL is a 72.14%-owned subsidiary of Bank of Ceylon. On the other hand, MBSL Savings Bank ltd. (formerly known as Ceylinco Savings Bank) is a 75.19%-owned subsidiary of MBSL.
MBSL’s acquisition of MBSL Savings Bank took place in April 2009. Since then MBSL had infused capital into MBSL Savings Bank to continue its operations.
