Comparative analysis on the profitability determinants of Malaysian Islamic and conventional banks

Islamic Banking has become competitive against conventional banking since it is one of the fastest growing institutions nowadays. Therefore, it is reasonable to expect that the performance of both Islamic and conventional banks has become the center of attention particularly in term of their profitability. The main objective of this study is to compare the bank-specific factor that mainly impacts on the profitability of
Islamic and Conventional banks. The dependent variable for this study is Return on Asset (ROA) while the independent variables are Capital Ratio (ETA), Bank Size (SIZE), Liquidity Ratio (LIQR) and Deposit Ratio (DTA). Secondary data was used from 16 Islamic banks (144 observations) and 22 Conventional banks in Malaysia (183 observations), over the 2008 - 2016 period. The study found that the bankspecific factors, namely ETA and DTA have a significant impact on the profitability of Islamic banks in Malaysia. Meanwhile, for the Conventional banks in Malaysia, SIZE, LIQR, and DTA are found to be significant to their profitability.