Fitch Ratings Lanka has upgraded MCSL Financial Services Limited’s (MFSL) national long-term rating of ‘BBB(lka)’ to ‘A+(lka)’. The outlook is stable.
Fitch has simultaneously removed the rating from Rating Watch Positive and withdrawn the rating as the company no longer exists. Accordingly, Fitch will no longer provide ratings or analytical coverage for MFSL. 

The rating action follows the public announcement on January 2, 2015 by Merchant Bank of Sri Lanka and Finance PLC (MBSF) that it has merged with MFSL and MBSL Savings Bank Limited (MSB). The merger of the three companies was registered with the Registrar-General of Companies in Sri Lanka on January 1, 2015. 

The multiple notch upgrade of MFSL’s rating reflects the reassessment of support to the merged entity from its 74.6 percent owner, Bank of Ceylon (BOC: AA+(lka)/Stable). MBSF will be the only licensed finance company that BOC owns that provides vehicle finance to customers who are not typically served by banks. 

The three notch differential between the ratings on BOC and the surviving entity reflects the latter’s limited role in the group, negligible profit and asset contribution and the absence of significant operational integration. Further, Fitch does not consider a disposal of the merged entity as being material for the BOC franchise with the merged entity being branded independently from BOC.