1.

Data and methodology

Data: The word data is very wide in its explanation and use and come from a Latin word datum
which means to give something. The definition of data is explained in different ways because
of its wide use. The data mean collection of raw statistics, numbers, amounts and features to
analyze these for decision making. Data is a vital source for a research without it nothing can be
find or possible to do research. The information is the advance for of data that is come after
doing some processing on the data. Information in today world is a vital source to make better
decisions and it is more arrange and profound form of data. So both data and information are
significant to conduct a thorough research.
Methodology: It is a 0rganised system which is given the guideline or rules, Measure,
method to explore the particular problems in that arena. Methodology is vital area of research
because researcher picks the most suitable type of methods to solve particular information so that
they easily make impressive decisions.

3.1 SAMPLE:
Data mean acquisition of raw statistics and amounts and features to analyze these for decision
making. There is availability of two types of data collection sources through primary source and
secondary source. In this research our area of focus for data is secondary sources in which we
analyses the articles and different research papers. Another medium for data collection is the use
of web sites of banks to find their financial statements information. The data of five years from
the period 2007-2011 is taken from the financial statements of banks. This five years period is
selected due this reason that during this period banking sector passed through worst conditions.
Five Islamic banks and five conventional banks were selected for this purpose from the banking
sector. Both of these banks have big market share and well known banks in banking sector.
Karachi stock exchange KSE is very favorable financial market of Pakistan. The establishment
of KSE is come into account in Sept 1947. KSE is a transparent, fair and efficient market with
local and some foreign institutions which are listing in that. Its started its operation with KSE 30
index and now expanding it toward 100 indexes which is the capital weighted index of the 100
best performing companies by covering the 86% market capitalization. Karachi stock exchange
was declared as Best performing stock market of the world by business week and USA base
newspapers said it the best bourses of the world. It also known as second oldest market of the
south Asia. It now has the four indices available KMI 30, KSE 100, KSE 30 and KSE all shares
index. The KSE totally are running through electronic system which has linked with other
market of the world. There is total 34 sector operating in KSE and every sector contained a wide
range of companies. Because my area of work is banking sector so that there are total 23 banks
which are listed on KSE.
3.2 INDEPENDENT VARIABLES:
3.2.1 CAR ratio
It an indicator which is measured the strength of banks capital. It is shown the risk
weight of credit exposure. CAR ratio is very useful for checking the capital of financial
institutions.
CAR = one tier capital + two tier capital / Risk weighted assets

3.2.2 ROE ratio
A ratio that used to measure the return of total equity of a company. ROE is sum up by
using firms net profit and total equity finance ROE is shown in percentage.
ROE= net income / total assets
3.2.3 Deposits total asset ratio
It is shown that what is credit standing of bank by showing relation between deposits and
assets of banks.
Depositto totalasset= total deposits / total assets

3.2.4 Advance turnover
Advance turnover is represented that how much interest earned from total advances of
bank. It is useful measure to check the efficiency of bank performance
Advance turnover= total sales / total advances

3.2.5 Net spread ratio
Spread ratio is used to measure that a bank how much net interest income earned. This
ratio is represented the primary and basic income of banks.
Net spread ratio = interest income interest expenses
3.3 DEPENDENT VARIABLES:
3.3.1 ROA
An indicator that used to measure the efficiency of total assets of company. ROA is
obtained with the use total average asset of bank and net profit after tax, ROA is shown
as a percentage. Sometimes its also known as return on total investment of bank.
ROA= net income / total assets
The model of this is as follow:
The data we analyze here is through the use of regression and correlation model to find out the
relationship among the interest rates and profitability of the banking sector.
The descriptive statistical test that is applied on this data is as follow:
Mean: It is used to check the average of variables which are used in research.
Standard deviation: is also applied on the data for the purpose of inspection of the deviation in
between the values.
3.4 Hypothesis:
Islamic banks are performing well interest base banks. Ho
Conventional banking institutions are performing efficiently well than Islamic banks. H1
3.5 Empirical model:
Return on asset
Performance
it
=
0it
+
1
CAR
it
+
2
NS
it
+
3
ATR
it
+
4
DTTA
it
+
5
ROE
it
+
it