Comparative Financial Performance Analysis of Conventional and Islamic Banks in Pakistan

11 Pages Posted: 27 Aug 2018

See all articles by Ahmed Imran Hunjra

Ahmed Imran Hunjra

University of Waikato; Pir Mehr Ali Shah Arid Agriculture University Rawalpindi (PMAS)

Amber Bashir

Pir Mehr Ali Shah Arid Agriculture University Rawalpindi (PMAS)

Date Written: 2014

Abstract

Financial performance is a general measure of firm’s overall financial health over a given period of time. The aim of this study is to compare financial performance of Islamic and Conventional banks to support depositors, bank managers, shareholders, investors, and regulators by providing true picture of financial position of Islamic as well conventional banks in Pakistan Ratio analysis technique is used to analyze financial performance of both banks. Data is collected from annual financial statements i.e. Balance sheet and Income statement for the period of 2008-2012. Nineteen ratios were estimated to measure these performances in terms of profitability, liquidity, risk and solvency, capital adequacy, operational, deployment and cash flow. Independent sample t test was used to determine significance of mean differences of these ratios between two banks. The study concludes that Conventional banks are more profitable, deployed and operationally efficient while less liquid and more risky as compared to Islamic Banks and also found a significant mean difference in profitability, capital adequacy, and cash flow ratio of both banks. To increase performance banks should conduct internal evaluation to improve its activities and to overcome weaknesses.

Keywords: Financial Performance, Comparative Analysis, Pakistani Banking Sector, Investors

Suggested Citation

Hunjra, Ahmed Imran and Bashir, Amber, Comparative Financial Performance Analysis of Conventional and Islamic Banks in Pakistan (2014). Available at SSRN: https://ssrn.com/abstract=3229708 or http://dx.doi.org/10.2139/ssrn.3229708

Ahmed Imran Hunjra (Contact Author)

University of Waikato ( email )

Te Raupapa
Private Bag 3105
Hamilton, 3240
New Zealand

Pir Mehr Ali Shah Arid Agriculture University Rawalpindi (PMAS) ( email )

Muree Road Rawalpindi
Shamsabad, Punjab 44000
Pakistan
00923457162527 (Phone)

Amber Bashir

Pir Mehr Ali Shah Arid Agriculture University Rawalpindi (PMAS) ( email )

Rawalpindi, 44000
Pakistan

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