MBSL sets ambitious target to grow balance sheet to Rs.50bn by 2026

By Nishel Fernando

Merchant Bank of Sri Lanka & Finance PLC (MBSL), a subsidiary of Bank of Ceylon, has set an ambitious objective to increase its balance sheet to Rs.50 billion by 2026, following a period of notable financial expansion and strategic initiatives.

“MBSL’s primary goal is to expand our balance sheet to Rs.50 billion by 2026, ensuring a high-quality portfolio while maintaining strong compliance within the NBFI sector. The board, management and parent company are fully aligned in driving this growth. By implementing strategic plans and exploring synergies with our parent company, we are confident in achieving this milestone,” MBSL CEO Dammika Hapuhinna told the company’s shareholders in its latest annual report. 

The announcement follows a landmark year in 2024, which Hapuhinna described as a “year of success”. MBSL saw its balance sheet expand to a historic Rs.40 billion in the period, a notable increase from its previous range of Rs.20-30 billion. Profit after tax also witnessed a surge, reaching Rs.240 million, when compared to Rs.20.8 million recorded in the previous year.

A cornerstone of MBSL’s future strategy is a significant technological upgrade with the implementation of a new core banking platform, slated for completion by early 2026.

“The new core banking platform will introduce enhanced digital services, providing the customers with seamless access and improved transaction capabilities,” Hapuhinna explained. “Recognising that many competitors already offer such features, MBSL has made a strategic decision to prioritise digitalisation. This much-needed transition is a significant milestone in MBSL’s commitment to technological advancement and customer-centric innovation.” 

While this initiative represents a substantial capital investment and presents short-term challenges, it is viewed as crucial for enhancing operational capabilities and future competitiveness.

MBSL’s financial growth and stability strategy emphasises organic expansion, primarily through loan portfolio growth. This will be accomplished by strengthening the core business, increasing market penetration and leveraging opportunities arising from the resumption of vehicle imports. 

Hapuhinna noted that product enhancement, with new offerings aligned with emerging market trends, would be a key focus in 2025.

Enhancing operational efficiency will remain a key objective for MBSL this year. The company successfully improved its cost-to-income ratio from 90 percent to 78 percent in 2024 and is actively working to bring it closer to the industry benchmark of 50-60 percent. 

In addition, strategic branch relocations are also planned to improve customer accessibility.

MBSL’s confidence is buoyed by its recent financial performance. In 2024, the company’s total assets grew by 19.3 percent year-on-year (YoY) to Rs.40.2 billion. Gross loans and advances saw a substantial increase of 30.6 percent YoY, reaching Rs.28.35 billion, indicating renewed credit activity. The total deposit base also grew by 2 percent YoY to Rs.25.95 billion.

A key achievement was the sharp decline in the net nonperforming loan ratio to 3.82 percent, from 6.53 percent in the previous year, reflecting improved credit quality and effective recovery strategies. The provision coverage ratio also improved to 48.03 percent.

While the loans-to-deposit ratio increased to 113.63 percent, indicating more aggressive lending, the company noted a decline in capital adequacy ratios. The core capital ratio dropped to 11.97 percent and the overall capital ratio to 14.45 percent, highlighting a need for careful capital planning as MBSL expands its asset base.