Evaluating the Financial Performance of Islamic and Conventional Banks of Pakistan: A Comparative Analysis

Abstract

The objective of this study is to evaluate the comparative financial performance of Islamic and conventional banks. To make an appropriate comparative study profitability and liquidity ratios of Islamic banks (Mezan Bank Ltd, Bank Islamic and Albaraka) and conventional banks (Faysal Bank, KASB and Bank of Khyber) are used during the period from 2007 to 2009. The sampled banks are selected on covenant sampling technique on the basis of almost having equal weight of invested capital and number of existing branches. To make substantially noteworthy results, paired sample t-test is used. The results show that Islamic banks have high growth rate and profitability over the conventional banks. Moreover the Islamic banks have high liquidity power over conventional banks.