7 March 2022 07:46 am Views - 211
Merchant Bank of Sri Lanka and Finance PLC (MBSL) announced yesterday that it has made a strong turnaround in 2O21. It has 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.
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 its 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 for a 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 the CBSL loan schemes to those affected by the pandemic but also by MBSL acting proactively to manage stress within its customer portfolio. Thus, the lending portfolio increased by 5.2 percent to Rs.28 billion while the deposit base also showed an increase in growth of 2.5 percent to Rs.22 billion.
The income statement displays a resounding improvement. Gross total income from all revenue sources was up 15 percent to near 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 percent 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 percent 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 Rs.812 million in 2021.
MBSL CEO 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.”