Interest income fell 17 percent to 704 million rupees amid a falling rate environment and interest expenses fell at a faster 34 percent to 328 million rupees, allowing net interest expenses to rise 8 percent to 376 million rupees.

Loan loss provisions fell 91 percent to 7.6 million rupees for the quarter from 81 million rupees a year earlier.

But fee income fell 67 percent to 98 million rupees from 298 million rupees a year earlier. In the 2009 many banks made large profits on their bond portfolio when interest rates fell as Sri Lanka emerged from a balance of payments crisis.

PABC said its performing loans rose to 12.9 billion rupees by end June 2010 from 9.8 billion rupees in December 2009. Total non-performing loans fell to 2.48 billion rupees from 2.51 billion rupees.

"There is now much greater focus in growing the business and we are confident that the Bank has now started gaining the momentum which will see greater results in the second half of the year," chief executive Claude Peiris said in a statement.

The firm said it had raised fresh capital through a rights issue and capital adequacy was not 19.9 percent. Its statutory liquid assets ratio was 37.5 percent and it was in a "strong position" to give more loans, the statement said.

Deposits rose to 17.8 billion rupees from 16.3 billion rupees in December.

Gross assets rose to 23.9 million rupees from 21.5 billion rupees. Net assets rose to 2.5 billion rupees from 1.9 billion rupees.

Updated

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