The Merchant Bank of Sri Lanka (MBSL) said it has bought full ownership of ABC Insurance Company under a share transfer agreement entered with the shareholders of the company.

The insurance firm is part of Sri Lanka’a ABC group which has a strong presence in the shipping industry.

MBSL, which is owned by state-owned Bank of Ceylon, the largest commercial bank in Sri Lanka, has also announced that it intends to acquire Ceylinco Savings Bank (CSB).

CSB is part of the troubled Ceylinco group which is selling some of its firms to raise funds to pay depositors of a credit card company which collapsed.

RAM Ratings Lanka last month put Merchant Bank of Sri Lanka on Rating Watch, with a ‘developing outlook’, which means the rating could be raised or lowered, after the announcement on the CSB acquisition plan.

The rating watch will be resolved once the acquisition has been finalised and accepted by the stakeholders, together with the mode of financing, RAM Ratings said.

RAM has given MBSL long- and short-term ratings of AA- and P1.

RAM Ratings said that if MBSL is successful in acquiring CSB, the company will gain access to public deposits and thus diversify its funding base.

MBSL now has a specialised leasing-company licence from the Central Bank, which precludes it from accepting public deposits.

Lanka Rating Agency earlier this month assigned AA3/L1 ratings to Merchant Bank of Sri Lanka with a stable outlook.

The ratings are primarily based upon the credit strength and financial flexibility of MBSL, which stems from its parent, the Bank of Ceylon, the rating agency said.

The ratings are also supported by the bank’s strong capitalisation, improving performance, recovering liquidity levels and healthier asset quality.