Financial Performance Comparison between State-Owned Commercial Banks and Islamic Banks in Bangladesh

Abstract

In this modern era of banking, state-owned commercial banks and Islamic banks have been playing an evolving induct for a country’s economic acceleration, like Bangladesh. Current research aims to assess and assimilate the financial performance of Islamic banks and state-owned commercial banks in Bangladesh. For this study, researchers assemble secondary data from the annual reports of five Islamic banks and five state-owned commercial banks from 2015 to 2019. Researchers employed panel data for analyzing and determining the significant determinants of the banks’ performance to compare. As a measure of profitability, Return on Equity (ROE) has been considered as a dependent variable whereas the total asset, capital, capital adequacy ratio, liquidity, credit to deposit, Gross Domestic Product (GDP), and inflation are considered as independent variables. The findings of this study reveal that total asset, capital adequacy, and liquidity variables affect Islamic banks momentously whereas state-owned commercial banks are momentously affected by total asset and liquidity. But credit to deposit has no significant effect on both categories of banks. From these viewpoints, Islamic banks have a greater ability to influence the ROE than that of state-owned commercial banks and in terms of financial performance; Islamic banks are categorized as better-performing banks. Keywords: Islamic banks, State-owned commercial banks, Financial performance, Return on equity (ROE), Bangladesh