Financial Times

MBSL in expansion mode after turnaround
Merchant Bank of Sri Lanka Ltd (MBSL), having recorded its second highest profit in 23 years is looking at diversifying their business lines and expanding their scope this year.

"We are looking at new ventures, now that we are stable," managing director, Sunil G. Wijesinha said, adding that because expansion within the leasing sector is continuing they would bounce back in the aftermath of the disaster.

Emerging almost unscathed from the tsunami disaster at the tail end of 2004, Wijesinha is optimistic about the coming year. Despite 70 percent of its income being from the lease and hire purchase sector, of which the tourism industry accounts for more than 17 percent, they do not expect to see an impact on profits for 2005.

MBSL has made a strong come back from a stage of imminent liquidation in 1997 to a profit in 2004 and according to their annual report, investors will soon see it handling another IPO for 2005 as a sequel to its success in 2004 in providing corporate finance services and launching IPOs.

Wijesinha said that in a bid to expand the scope of MBSL, they would be opening new branches, expanding the capital market area and anticipating a venture into property development. MBSL is looking at the property development sector, initially servicing existing clientele and anticipating expansion later.

They have embarked on a hire purchase finance business from September 2004, further strengthening their leasing and hire purchase services. MBSL is also focusing on automated support services and a process of developing a disaster relief plan in a bid to refine their systems and procedures further.

With regard to the leasing sector, Wijesinha, in the MBSL annual report, said that they were implementing a strategy to lay emphasis on rehabilitation rather than seizure and recovery. "Expansion within the leasing industry is continuing," he said, the success of their strategy being evident in the fact that they have a client base of more than 16,000, with the lease activities at a billion rupee disbursement level, the highest ever recorded by MBSL. In the MBSL annual report, he explained that the reason for their stability was the Board's decision to adopt more stringent methods in creating provisions for leases.

MBSL created a general provision during 2004, which involves providing for a minimum of 0.5 percent of the net loan portfolio annually, as long as the provision does not exceed 2.5 percent of the net portfolio.

This provision has stood them in good stead in the aftermath of the tsunami disaster. MBSL has achieved their second highest profit in 23 years for the year 2004, up by 74 percent to Rs. 124 million for 2004 from Rs. 71 million in 2003. (DD). This has resulted in record earnings per share of Rs. 2.08, up from Rs.1.43 in 2003.

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