This indicates ROA and its comparing between conventional and Muslim Bankss. In 2007 the ROA of Islamic Bankss i.e. 1.43 % is greater than conventional i.e. 1.38 % . Second, ROA decreased to 1.14 % from 1.93 % and 2.18 % to 1.35 % during
2003-2004 for Islamic and conservative Bankss severally. Decline in ROA in 2003-04, conservative Bankss recovered it in 2004-2005.But the recovery was impermanent.
Since 2005, conventional Bankss ROA have invariably decreased. ROA of Islamic bank has been fluctuating as it increased in 2004-05, from 1.14 % to 1.37 % , but decreased to
1.30 % in 2006 and in 2007 it was 1.43 % with 0.13 % addition. ROA on an norm of conventional Bankss is 1.59 % that is higher than norm of Muslim Bankss ROA i.e. 1.49 % .
2008 Islamic and conventional Bankss fiscal consequences revealed whether ROA of conservative Bankss will maintain on worsening and whether ROA will increase or diminish of Muslim Bankss. However, Pakistan ‘s banking sector is turning but by looking at the 4years tendency of ROA both sort of banking has been confronting the job with profitableness.
Tax return on Equity:
The survey of ROE of conservative and Muslim Bankss will give some of import points to see. In 2003-2007 The ROE of conservative Bankss is higher than that of the Islamic Bankss.
In 2003, difference was big that decreased during 2004-2007. The difference is
17.6 % in 2003, this in 2007 has been plummeted to 2.5 % . This immense lessening in two ROE ‘s is largely due to Islamic Bankss overall tendency that is increasing ROE and lessening in conventional Bankss ROE. This all has given us an of import penetration. Muslim Bankss ROE followed conventional Bankss in footings of lessening and increase during 2003-07. Where as in the old ages when there is addition in the ROE of the Bankss, the addition in the ROE of Islamic Bankss is more than that of the conventional bank ( Muslim Bankss have 30 % addition as compared to conventional Bankss 12 % addition in 2003-05 ) , and Islamic Bankss lessening in ROE has been less than lessening in ROE of conventional Bankss ( Islamic bank has lessening of 8.5 % as compared to conventional Bankss 15 % lessening in 2005-06 ) .
Muslim Bankss ROE in 2003 was 12.23 % and it increased to 16.88 % ( 2007 ) . Whereas, in 2003 ROE of conventional Bankss was 29.83 % and in 2007 it has decreased to19.38 % . Fiscal statements analysis of Islamic Bankss have shown that overall net incomes are increased more than Muslim Bankss equity base that resulted in ROE to increase over clip. On the other manus, the group of 5 conventional Bankss, their equity base increased but their net incomes base decreased which was the chief ground for overall lessening in ROE from 2003-07.
However, Islamic Bankss ROE has improved. 13.27 % is the mean ROE for Islamic Bankss, whereas 22.76 % is that of conventional Bankss.
Net income Expense Ratio
PER is demoing that conservative Bankss are more profitable than Muslim Bankss in footings of disbursals in 2003-07. The survey indicates that conservative Bankss have been generated higher net incomes systematically for every rupee of expense spent during 2003-07 but with a diminishing tendency as comparison to Islamic Bankss.
There was lessening in 2003-04 but conventional Bankss PER increased in 2005, but after that it has been diminishing without any rise. Conventional Bankss had PER of 1.91 in 2003 but it decreased by 57 % and came down to 0.82 in 2007.Conventional Bankss this lessening is much more deep than of Muslim Bankss that happened during the same period.
In 2007 Islamic bank PER decreased to 0.72 from 0.94 in 2003 which makes it 20 % lessening. Further fiscal statements of the 5 conventional Bankss were analyzed which included the survey that revealed the fact that conventional Bankss have increased disbursals during 2005-07, However, for few other Bankss there was non such addition in the net income and even for some it decreased, which resulted in the lessening of PER for conventional Bankss.
Loan to Deposit Ratio ( LDR )
Islamic bank has been less liquid as compared to conventional Bankss harmonizing to loan to lodge ratio. But in 2007 the Islamic bank Loan to Deposit Ratio ( 63.35 % ) was better than that of commercial Bankss ( 70.89 % ) . Where as in 2003 LDR of Islamic bank from 95.36 % decreased to 63.35 % in 2007. This tendency indicates that there are more inclinations in sedimentations than loans and put accent on the betterment in the liquidness place of Muslim Bankss.
Conservative Bankss LDR has been lower as compared to Islamic Bankss and has been drifting between 70 % and 77 % . In 2003 LDR of Conventional bank was 73.85 % which in 2007 decreased to 70.89 % . Although Muslim Bankss mean LDR is higher ( 82.70 % ) than conventional Bankss Mean LDR ( 73.55 % ) .
Cash & A ; Portfolio Investments to Deposits & A ; Borrowings Ratio ( CPIDBR ) :
During 2003 to 2007 there was a lessening in hard currency & A ; portfolio investing ratio to lodge & amp ; adoptions of Muslim Bankss from 25.77 % to 21.60 % and conventional Bankss from 39.88 % to 29.12 % , in 2007 CPIDBR has increased for Islamic bank to 28.39 % and for conventional Bankss 36.90 % . But lessening for more than addition for both the Bankss. The increasing tendency in 2005 is clear indicant that liquidness place of Islamic and conventional Bankss are bettering.
The commercial Bankss higher CPIDBR shows that it is more liquid than Muslim Bankss.
Loan to Asset Ratio ( LAR ) :
Loan to lodge ratio shows that liquidity place of Muslim Bankss is acquiring better but loan to plus ratio has some different consequences. Figure shows that Islamic Bankss LAR is increasing whereas conventional Bankss LAR is between 59 % and 64 % .
The addition in LAR of Islamic Bankss clearly shows that they are taking burden of inordinate funding and keeping assets that are less liquid.
However, this indicates that there are opportunities of addition in profitableness of Islamic Bankss that was besides seen in profitableness ratio. In 2007 there was addition in LAR of Islamic bank to 66.63 % from 51.47 % ( 2003 ) while in 2007 conventional Bankss LAR increased to 59.78 % from 59.57 % ( 2003 ) . LAR analysis indicates that Murabaha has been more celebrated and largely used funding manner, after that comes Ijara, than export refinance ( Islamic strategy ) , and on 4th there is decreasing Mishawaka.
All the consequences of liquidness show that Muslim Bankss are making same asthat of conventional Bankss except CPIDBR where conventional Bankss are making better than Muslim Bankss. Furthermore, this survey found that Murabaha,
Ijara, export refinance ( Islamic strategy ) and Dimishing Musharaka are the most celebrated and most normally used manners of Islamic funding.
Hazard AND SOLVENCY RATIOS
Debt to Equity Ratio ( DER ) :
There was addition in Muslim Bankss Debt to equity ratio to 10.77times ( 2007 ) from 5.35times ( 2003 ) demoing an increasing tendency in every bit compared to conventional Bankss which has increased from 14. 76times ( 2003 ) to 17.29times ( 2004 ) but had a diminishing tendency after that and fell to 13.49times in 2007. Decrease in conventional Bankss DER is more than the Muslim Bankss additions in DER. Consequences are demoing that commercial Bankss are more hazardous than Muslim Bankss.
“ Deposits ” are the major liability for both sorts of Bankss. Money that has been borrowed bases 2nd among the Bankss entire liabilities about for all conventional Bankss but all Islamic Bankss are prohibited by Islamic Shari’ah and they can non take or give debts that are interest-based. Increase in DER tendency shows that sedimentations base is increasing more than equity base for Muslim Bankss. Our analysis further shows that the fiscal statements of conventional Bankss, DER has diminishing tendency because of its trust on equity funding with comparing to debt and deposits base.
Higher DER during the period of 2003-07, points out to the conventional Bankss that they are more hazardous than Muslim Bankss. Average DER is 8.48times for Muslim Bankss as compared to conventional Bankss 15.37times.