Financial Performance of Islamic and Conventional Banks in Pakistan: A Comparative Study

This study was conducted to compare the financial performance of Islamic and Conventional banks to facilitate depositors, bank managers, shareholders, investors and regulators by providing true picture of financial position of Islamic and Conventional banks in Pakistan. Financial ratios were estimated from annual reports and financial statements i.e. Income statement and Balance sheet for the period of 2006 to 2009. Eighteen financial ratios were estimated to measure these performances in term of profitability, liquidity, risk and solvency, capital adequacy, deployment and operational efficiency. Independent sample t-test and ANOVA was used to determine the significance of mean differences of these ratios between and among banks. The study concluded that Islamic banks proved to be more liquid, less risky and operationally efficient than conventional banks.