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%

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. But CV shows the higher volatility
for the Islamic banks than the commercial banks. The ROE shows a decreasing pattern for both
commercial and Islamic banks.
III. Cost to Income ratio (COSR)

COSR is calculated using the equation3 based on the data. 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
36.130%
28.512%

2011
41.280%
40.842%

2012
44.116%
33.261
%

2013
44.290%
45.037%

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

Mean
41.454%
36.913%

CV
12.117%
22.243%

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 12.117%. But the mean value does not show a
great difference. For both of them COSR shows an increasing pattern.

7. A.2. Liquidity Performance

I. Net Loans to Asset ratio (NetLTA)

NetLTA is calculated using the equation4 based on the data. 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

69.920%

65.810%

59.380%

64.004%

8.128%

Islamic banks

74.280%

72.398%

60.904
%
66.311%

65.999%

69.747%

5.452%

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

II. Net Loans to Deposits & Borrowing ratio (NetLD&B)

Net Loans to
Deposit &
borrowing
Commercial banks
Islamic banks

2010

2011

2012

2013

Mean

CV

84.410%
90.051%

80.210%
81.251%

73.501%
78.016%

73.360%
78.595%

77.870%
81.978%

8.605%
7.554%

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

Credit risk performance

I. Equity to Asset ratio (EQTA)

Equity to Asset ratio

Commercial banks

2010
10.870%

2011
10.580%

Islamic banks

8.328%

9.500%

2012
9.637
%
8.54%

2013
9.590%
9.01%

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

Commerci
al banks

Islamic
banks

Mean
10.169
%
8.938%

CV
10.766%
12.952%

II. Equity to Loan ratio (EQL)

Equity to Loan ratio

Commercial banks

2010
15.630%

2011
16.070%

Islamic banks

11.218%

13.382%

2012
15.769
%
12.470
%

2013
16.190
%
13.320
%

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. Also the
Commercial banks are less volatile than the Islamic banks. The mean
EQL of commercial banks is 15.915% whereas for the Islamic banks is
12.519%. The CV of commercial banks 9.508% and Islamic banks is
15.858%.

Mean
15.915%

CV

12.598%

15.858%

9.508%

7. B Overall performance
This section provides the sector wise performance for three core areas of profitability, liquidity,
credit risk by simple sector wise averages for both streams of banking.

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
1.470%
14.293%
41.454%

CV

Mean
1.406%
14.425%
36.913%

CV

Mean
64.004%
77.870%

CV

Mean
69.747%
81.978%

CV

Mean
10.169%
15.915%

CV

Mean
8.938%
15.915%

CV

51.754%
47.367%
12.117%

8.128%
8.605%

10.766%
9.508%

32.481%
53.417%
22.243%

5.452%
7.554%

12.952%
15.858%

Data Analysis:
ROA, ROE and COSR are the financial measures that depict the profitability of Islamic banks and
commercial banks. ROA of commercial banking sector is 1.470% which is higher than Islamic
banking sector that is 1.406% and this indicates that assets of commercial banks are capable of
yielding more return than Islamic banks. 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. But in case of COSR
Islamic banks are leading with an industry average of 36.913% that is much better than the
commercial banks whose average is 41.454%.So it is very difficult to conclude which bank is
dominating in profitability.

Two different indicators (NetLTA, NetLD&B) are used to measure the liquidity risk of portfolios
of Islamic and commercial banking. NetLTA(net loans to asset ratio) of Islamic banking sector is
69.747% while NetLTA of commercial banking sector is 64.004% .Higher ratio of Islamic banking
sector shows that this sector is tied up in loans and has lower liquidity as compared to commercial
banks. So, commercial banks are more liquid as compared to Islamic banks. NetLD&B (Net Loans
to Deposits and Borrowing ratio) of Islamic banking sector is 81.978% while that of commercial
banking sector is 77.870%. Higher NetLD&B of Islamic banking sector shows that Islamic banks
face more liquidity risk than commercial banking sector. Overall liquidity management of
commercial banking is better than Islamic banking.
Credit risk of both banking sectors is depicted by EQTA, EQL and IMLGL. It depicts from table-2
that EQTA (Common Equity to Total Assets ratio) of Islamic banking sector is 8.938% while
EQTA of commercial banking sector is 10.169% showing that there is not much difference in
commercial and Islamic banks. This ratio also shows that commercial banks have more capacity to
absorb potential expected or unexpected loan asset losses as compared to commercial banks. But
there is much more difference in EQL of commercial banks and Islamic banks. The EQL of
commercial banks are 15.915% when the EQL of Islamic banks are 15.915% which means that
commercial banks are better able absorbing loan losses than Islamic banks.
Again in the credit risk performance of both of commercial and Islamic banks are almost same.
But we can conclude that when the commercial banks are better able in absorbing loan losses,
Islamic banks are better able in controlling loan losses.
In the investing world, the coefficient of variation allows you to determine how much volatility, or
risk, you are assuming in comparison to the amount of return you can expect from your
investment. In simple language, the lower the ratio of standard deviation to mean return, the better
your risk-return tradeoff. Note that if the expected return in the denominator of the calculation is
negative or zero, the coefficient of variation could be misleading.
The coefficient of variation could help investors select investments based on the risk/reward ratio
and their profiles. For example, 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, in relation to the
overall market or its industry. Conversely, risk-seeking investors may look to invest in assets that
have had a high degree of volatility.

Individual Bank Performance

Table 10 Commercial Banks
Bank

ROA

ROE

COSR

NetLT
A

Netld&
b

EQTA

EQL

IMLG
L

SOUHEAST

1.425
%
1.220
%
1.408
%
1.898
%
0.986
%
1.243
%
2.112
%
1.331
%
1.54
%
1.557
%
1.463
%

12.433
%
13.540
%
13.263
%
16.415
%
12.657
%
15.554
%
16.384
%
16.502
%
15.43%

26.644
%
66.440
%
33.725
%
37.374
%
49.140
%
36.621
%
35.794
%
42.817
%
37.26%

63.843
%
61.920
%
64.918
%
69.835
%
57.060
%
66.449
%
66.004
%
63.446
%
64.64%

77.835
%
73.800
%
79.683
%
76.101
%
73.650
%
80.896
%
81.413
%
75.924
%
77.82%

11.384
%
8.930%

17.785
%
14.500
%
16.166
%
15.383
%
13.104
%
12.894
%
19.177
%
12.681
%
15.19%

4.044%

15.967
%
14.686
%

38.123
%
40.646
%

65.135
%
64.235
%

79.013
%
77.458
%

9.730%

14.985
%
15.209
%

3.059%

PREMIRE
NCC
AB
BRAC
BANK ASI
EASTERN
MERCA
PRIME
CITY
Mean

10.498
%
10.788
%
7.467%
8.451%
12.682
%
7.996%
9.79%

9.776%

5.020%
4.549%
3.154%
6.651%
3.314%
2.667%
3.384%
2.87%

3.961%

Table 4 Islamic Banks

Bank

ROA

ROE

COSR

NetLTA

Netld&b EQTA

EQL

IMLGL

IBBL

1.149%

15.263%

38.672%

75.038%

87.004%

7.644%

10.206%

2.991%

SIBL

1.170%

13.000%

39.840%

63.100%

75.160%

9.110%

14.470%

4.380%

EXIM

1.706%

15.874%

34.274%

73.782%

86.942%

10.640%

14.446%

2.891%

Shahjalal 1.547%
Mean
1.393%

19.247%

34.506%

71.385%

83.080%

7.990%

11.263%

3.305%

15.846%

36.823%

70.826%

83.046%

8.846%

12.596%

3.392%