MBSL marks strong turnaround in 2021 Financial News

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Merchant Bank of Sri Lanka and Finance PLC (MBSL) announced yesterday that it has made a strong turnaround in 2O21. It reported a profit before tax (PBT) of 812 million rupees for 2021, compared to a loss of 1.3 billion rupees in 2020.

Not only are the 2021 results MBSL’s largest annual profit in the past 10 years, they also reflect vigorous 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 MBSL’s ability and resilience to overcome obstacles, stay focused and manage results.

Apart from this remarkable turnaround, MBSL achieved a significant milestone in 2021 by successfully completing a rights issue generating a sum of Rs 2.1 billion which was added to the capital base, thus conclusively resolving issues related its capital adequacy ratio. Due to insufficient capital reserves, MBSL faced hurdles including lending and deposit caps imposed by the regulator. These controls have now been removed and the business can expect rapid growth as the Sri Lankan economy prepares for expansion.

MBSL Chairman, Kanchana Ratwatte, referring to the 2021 PBT, said, “The current turnaround once again shows our resilience in the face of a challenging environment. MBSL’s long-term vision and strategic focus across the business has delivered good results and we remain optimistic for this year.

PBT’s turnaround for the year 2O21 results not only from the wise actions taken by the government to provide appropriate funding through CBSL’s loan programs to those affected by the pandemic, but also from the fact that MBSL acted proactively to manage stress within its client portfolio. Thus, the loan portfolio increased by 5.2% to 28 billion rupees while the deposit base also showed an increase in growth of 2.5% to 22 billion rupees.

The income statement shows a marked improvement. Total gross income from all sources of income increased by 15% to nearly Rs 6 billion in 2021. Net interest income doubled over the period to Rs 2.8 billion, which indicates competitive pricing as well as improved volumes. Fees, commissions and other operating income increased by 173% to Rs 385 million. Showing strong management ability, all operating expenses including HR and depreciation remained at the same level as 2O2O at Rs.2 billion.

Impairment charges, reflecting an improvement in the loan portfolio, recorded a significantly low charge, falling from a high of Rs 553 million in 2020 to just Rs 74 million, a reduction of 87% in 2021. of all these aspects together has resulted in the strong turnaround in PBT from a loss of 1.3 billion rupees in 2O2O to a profit of 812 million rupees in 2021.

Dammika Hapuhinna, CEO of MBSL, reflecting on the 2021 turnaround under difficult circumstances, said, “Our commitment to customers as well as our early actions have paid off. We anticipated the ongoing difficulties within our client portfolio and reacted quickly to minimize the damage. We are now positioned for growth.


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