"We cut some unnecessary costs, stopped overtime, cut fuel allowances and increased staff retirement age from 55 to 58," Raaj de Silva, chief financial officer at Seylan Bank said.

"That’s how we were able to bring down costs."

The bank was put under state-run Bank of Ceylon by the regulator and is being managed by a new board after it suffered a run following the collapse of an unregulated firm in Sri Lanka's Ceylinco group - its then controlling shareholder - in 2008.

In 2009, Seylan made a profit of 448.7 million rupees up from a loss of 799.8 million rupees in 2008. The banks stand alone profits were up 250 percent, to 543.3 million rupees.

The groups other overhead costs fell 21.2 percent to 2.8 billion rupees. Total operating costs had come down 23.2 percent to 9.1 billion rupees from a year earlier.

"The picture I have to pain to you today is completely different from the canvass one year ago," Eastman Narangoda, chairman of Seylan Bank said.

"We struggled under a complex problem of a failed bank with a run on its deposits and an extraordinary liquidity crisis."

At the end of 2009 Seylan's deposits had recovered to almost 105 billion rupees, while non performing loans (NPLs) were at 29.3 percent, against average NPLs of 6.8 percent amongh the three largest commercial banks, Fitch Ratings Lanka.

The rating agency confirmed the banks BBB+(lka) rating last week. Over 16 percent of Seylan's NPL's related to loans to five Ceylinco group companies, Fitch said.

The bank is looking to take parate action against some of the defaulters, Ajita Pasqual, Seylan Bank's chief executive said.

'We want to cut the NPL's to around 18 percent at the end of this year," Pasqual said.

"If we can cut it down to 10 percent I will be a very happy man."

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