A comparison study between the profitability of Islamic and conventional banking in Malaysia / Nuur Aniqah Bazilah Ismail

The financial world knows for a long time creative administrations and firms to generate profits. Among those developments, there are the Islamic banks whose growth and expansion have surprisingly expanded too fast and known an incredible achievement everywhere in the world. Consequently, many studies are concerned about this outstanding growth and are conducting various studies as to explore this phenomenon more in deep. Especially in Malaysia, whereas as an Islamic Financial hub country, it is crucial to have this kind of study in order to improve the performance of bank. Consequently, the aim this study is to compare between the performance of both banks: Islamic and conventional, in terms of their profitability in Malaysia. The study uses the period of the year 2012 until the year 2016. The sample used is 32 banks where 16 banks of Islamic Bank and another 16 banks are from Conventional Banks with total 160 Observations. Meanwhile, data are collected from Bank Negara Malaysia, Bank’s annual report and DataStream. Besides, the type of this study is used cross sectional of Ordinary Least Square (OLS). This study finds that Islamic Banks are more profitable than Conventional Banks based on the relationship between Total Equity to Total Asset and Return on Asset (ROA). As for independent variables such as Total Loan to Total Asset and Deposit to Total Asset still Conventional Bank is leading rather than Islamic Bank.