You are on page 1of 9

Year to year performance for each ratio

1 Profitability Performance
I. Return on asset (ROA)

ROA is calculated using the equation1 based on the data. The calculated results are given below in
table [1]
Table [1] ROA of commercial and Islamic banks

Return on Asset
(ROA)
Commercial banks
Islamic banks

2010

2011

2012

2013

Mean

CV

2.280%
2.004%

1.730%
1.346%

0.881%
1.275%

0.990%
0.999%

1.470%
1.406%

51.754%
32.481%

Also the calculated results are shown in graph in the following:

Figure 1 ROA of commercial and Islamic banks
The Mean ROA shows a better result for the commercial banks. But the coefficient of
variation (CV) shows the greater riskiness of commercial banks. Both show a decreasing
pattern in their ROA.

II. Return on equity (ROE)

ROE is calculated using the equation3 based on the data. The calculated results are given below in
table [2]
Table [2] ROE of commercial and Islamic banks
Return on
Equity(ROE)
Commercial banks
Islamic banks

2010

2011

2012

2013

21.430%
23.202%

16.620%
14.505%

9.211%
11.623%

9.910%
8.370%

Mean
14.293%
14.425%

CV
47.367%
53.417%

The ROE shows a decreasing pattern for both commercial and Islamic banks.290% 45.243% .280% 40.261 % 2013 44.454% 36.512% 2011 41.130% 28. Cost to Income ratio (COSR) COSR is calculated using the equation3 based on the data. III. The calculated results are given below in table [3] Table [3] COSR of commercial and Islamic banks Cost to Income ratio Commercial banks Islamic banks 2010 36.116% 33. But CV shows the higher volatility for the Islamic banks than the commercial banks.037% Also the calculated results are shown in graph in the following: Mean 41.Also the calculated results are shown in graph in the following: Commercial banks Islamic banks Figure 2 ROE of commercial and Islamic banks The mean ROE of Commercial and Islamic banks are almost equal.117% 22.842% 2012 44.913% CV 12.

The calculated results are given below in table [4] Table [4] NetLTA of commercial and Islamic banks Net Loan to Asset ratio (NetLTA) Commercial banks 2010 2011 2012 2013 Mean CV 69.2.280% 72.920% 65.128% Islamic banks 74.810% 59.999% 69.380% 64. For both of them COSR shows an increasing pattern.904 % 66.452% Also the calculated results are shown in graph in the following: . A.747% 5.117%.004% 8. Liquidity Performance I. 7. Net Loans to Asset ratio (NetLTA) NetLTA is calculated using the equation4 based on the data. But the mean value does not show a great difference.398% 60.311% 65.Figure 3 COSR of commercial and Islamic banks From the above calculations we can say the performance of commercial banks is much better than the Islamic banks with the mean CV of 12.

410% 90. Net Loans to Deposits & Borrowing ratio (NetLD&B) Net Loans to Deposit & borrowing Commercial banks Islamic banks 2010 2011 2012 2013 Mean CV 84.210% 81.251% 73.595% 77.870% 81.051% 80.978% 8.II.605% 7.501% 78.016% 73.360% 78.554% Also the calculated results are shown in graph in the following: .

766% 12. Equity to Asset ratio (EQTA) Equity to Asset ratio Commercial banks 2010 10.54% 2013 9.637 % 8.580% Islamic banks 8.169 % 8.590% 9.952% .Credit risk performance I.870% 2011 10.328% 9.01% Also the calculated results are shown in graph in the following: Commerci al banks Islamic banks Mean 10.938% CV 10.500% 2012 9.

Equity to Loan ratio (EQL) Equity to Loan ratio Commercial banks 2010 15.630% 2011 16.190 % 13.858% 9.508% and Islamic banks is 15.382% 2012 15.508% .218% 13.470 % 2013 16.598% 15. The CV of commercial banks 9.769 % 12.915% CV 12.519%.320 % Also the calculated results are shown in graph in the following: Commerci al banks Islamic banks Figure 7 EQL of commercial and Islamic banks The commercial bank EQL is higher than the Islamic banks. The mean EQL of commercial banks is 15.858%.II. Also the Commercial banks are less volatile than the Islamic banks.070% Islamic banks 11. Mean 15.915% whereas for the Islamic banks is 12.

243% 5.915% CV 51.915% CV Mean 8.470% 14.117% 8. B Overall performance This section provides the sector wise performance for three core areas of profitability.952% 15.367% 12.508% 32.554% 12.454%.754% 47.766% 9.913% that is much better than the commercial banks whose average is 41.978% CV Mean 10.128% 8.406% and this indicates that assets of commercial banks are capable of yielding more return than Islamic banks. liquidity. credit risk by simple sector wise averages for both streams of banking. But in case of COSR Islamic banks are leading with an industry average of 36.169% 15. Similarly ROE also shows that commercial banks are more profitable than Islamic banks which depicts that commercial banks are more efficient in generating profits from every unit of shareholders equity/bank capital.913% CV Mean 64.7.452% 7.605% 10. ROE and COSR are the financial measures that depict the profitability of Islamic banks and commercial banks.870% CV Mean 69.470% which is higher than Islamic banking sector that is 1.So it is very difficult to conclude which bank is dominating in profitability.293% 41.481% 53.747% 81.454% CV Mean 1. .938% 15.425% 36. Table 9 Financial Performance of Islamic Vs Commercial Banking Performance measures ROA ROE COSR Liquidity NetLTA NetLD&B Credit Risk EQTA EQL Commercial Banks Islamic Banks Mean 1.406% 14. ROA of commercial banking sector is 1.004% 77.417% 22.858% Data Analysis: ROA.

Again in the credit risk performance of both of commercial and Islamic banks are almost same. For example. It depicts from table-2 that EQTA (Common Equity to Total Assets ratio) of Islamic banking sector is 8. the coefficient of variation allows you to determine how much volatility. NetLD&B (Net Loans to Deposits and Borrowing ratio) of Islamic banking sector is 81. the coefficient of variation could be misleading. an investor who is risk-averse may want to consider assets that have historically had a low degree of volatility and a high degree of return. The coefficient of variation could help investors select investments based on the risk/reward ratio and their profiles. But there is much more difference in EQL of commercial banks and Islamic banks.004% . the lower the ratio of standard deviation to mean return. In the investing world.870%.169% showing that there is not much difference in commercial and Islamic banks. Credit risk of both banking sectors is depicted by EQTA. or risk.978% while that of commercial banking sector is 77.747% while NetLTA of commercial banking sector is 64. Islamic banks are better able in controlling loan losses. you are assuming in comparison to the amount of return you can expect from your investment. So. Conversely. The EQL of commercial banks are 15.Higher ratio of Islamic banking sector shows that this sector is tied up in loans and has lower liquidity as compared to commercial banks. NetLTA(net loans to asset ratio) of Islamic banking sector is 69.938% while EQTA of commercial banking sector is 10. EQL and IMLGL. Note that if the expected return in the denominator of the calculation is negative or zero.915% when the EQL of Islamic banks are 15. This ratio also shows that commercial banks have more capacity to absorb potential expected or unexpected loan asset losses as compared to commercial banks. In simple language. Higher NetLD&B of Islamic banking sector shows that Islamic banks face more liquidity risk than commercial banking sector. in relation to the overall market or its industry.Two different indicators (NetLTA. . commercial banks are more liquid as compared to Islamic banks. the better your risk-return tradeoff. risk-seeking investors may look to invest in assets that have had a high degree of volatility. NetLD&B) are used to measure the liquidity risk of portfolios of Islamic and commercial banking.915% which means that commercial banks are better able absorbing loan losses than Islamic banks. But we can conclude that when the commercial banks are better able in absorbing loan losses. Overall liquidity management of commercial banking is better than Islamic banking.

82% 11.924 % 77.540 % 13.683 % 76.101 % 73.112 % 1.038% 87.554 % 16.374 % 49.991% SIBL 1.874% 34.557 % 1.170% 13.408 % 1.263% 38.794 % 42.64% 77.385% 83.463 % 12.149% 15.835 % 73.43% 26.274% 73.470% 4.384 % 8.990% 11.646 % 65.843 % 61.800 % 79.440 % 33.823% 70.549% 3.080% 7.425 % 1.263 % 16.263% 3.967 % 14.817 % 37.177 % 12.846% 36.Individual Bank Performance Table 10 Commercial Banks Bank ROA ROE COSR NetLT A Netld& b EQTA EQL IMLG L SOUHEAST 1.506% 71.87% 3.644 % 66.502 % 15.596% 3.547% Mean 1.392% .123 % 40.930% 17.640% 14.004 % 63.000% 39.209 % 3.449 % 66.314% 2.243 % 2.667% 3.140 % 36.725 % 37.835 % 57.706% 15.446 % 64.650 % 80.393% 19.384 % 16.918 % 69.467% 8.782% 86.896 % 81.110% 14.104 % 12.384% 2.380% EXIM 1.840% 63.413 % 75.826% 83.19% 4.060 % 66.996% 9.059% PREMIRE NCC AB BRAC BANK ASI EASTERN MERCA PRIME CITY Mean 10.621 % 35.206% 2.160% 9.415 % 12.235 % 79.154% 6.013 % 77.044% 15.458 % 9.247% 34.846% 12.686 % 38.220 % 1.986 % 1.651% 3.894 % 19.135 % 64.672% 75.046% 8.961% Table 4 Islamic Banks Bank ROA ROE COSR NetLTA Netld&b EQTA EQL IMLGL IBBL 1.785 % 14.331 % 1.79% 9.446% 2.681 % 15.54 % 1.730% 14.898 % 0.433 % 13.682 % 7.985 % 15.020% 4.920 % 64.500 % 16.498 % 10.451% 12.891% Shahjalal 1.383 % 13.166 % 15.644% 10.004% 7.788 % 7.305% 15.26% 63.942% 10.657 % 15.776% 5.100% 75.