Performance Comparison Analysis of Islamic and Conventional Banks - Case Study of Pakistan

Abstract

The study is conducted to compare the financial performance of Conventional and Islamic banks working in Pakistan. In this regard five full fledge Islamic and five conventional banks are selected on the basis of their similar deposits. Time series data is being gathered from 2006 to 2014, from Financial Statement Analysis Reports of State bank of Pakistan. The performance of both banking systems is being evaluated by using Ratio Analysis, which is very common in measuring bank’s performance. Major advantage of this method is that it excludes all differences as sizes of banks are not equal. Nine ratios are taken which are grouped into three segments which include profitability, liquidity and capital/leverage ratios. Ratio analysis on performance comparison give us understanding that although Islamic banks are growing speedily over the last few years but still they need improvement  in comparison with conventional banks as they have longer history.

Keywords: Islamic banks, conventional banks, performance, Pakistan