Intellectual capital is recognized as an intangible value of company which gives competitive advantage. It plays an important role in financial performance. The purpose of this study is to explore the impact of intellectual capital on banks' performance in Sri Lanka. In this study, financial performance is measured by ROA of selected banks. Value-added intellectual capital approach (VAIC) is used to measure the intellectual capital of the banks. This study investigated ten local commercial banks in Sri Lanka for the period of 2009 to 2018. Secondary data has been extracted from the annual reports of the respective commercial banks for the analysis. Using quantitative methodology, data has been analyzed through panel regression analysis. Random effect panel regression sought to be the optimal model for the analysis. The findings of this study revealed that, Intellectual capital has a significant positive impact on financial performance of local commercial banks in Sri Lanka. In addition, researcher found that capital employed efficiency has significant impact on bank performance compared to structural capital efficiency. However, it was found that human capital efficiency do not have significant impact on bank performance. Hence, the finding of this research would motivate banks management to improve knowledge management practice in their organization.