List of Figures: Sl. No Figures Pages

List of Figures
Sl. No Figures Pages
Table-1 Sample of the study 8
Table-2 Status of Islamic Bank in Bangladesh. 18
Table-3 Differences between Islamic banking and conventional banking 20
Table-4 Differences between Riba and profit 21
Table-5 Average ROA of Islamic and conventional banks. 24
Figure-1 Analysis of Average ROA 24
Table-6 Average ROE of Islamic and conventional banks. 25
Figure-2 Average ROE of Islamic and conventional banks 25
Table-7 Average profit margin ratio of Islamic and conventional banks 26
Figure-3 Analysis of profit margin ratio of Islamic & conventional banks. 27
Table-8 Average EPS of Islamic and conventional banks 28
Figure-4 Average EPS of Islamic and conventional banks 28
Table-9: Average Capital Adequacy Ratio 29
Figure-5 Average Capital Adequacy Ratio 29
Table-10 Average NPL Ratio. 30
Figure-6 Average NPL Ratio. 31
Table-11 Total Loan & Investment (in million Tk) 31
Figure-7 Total loan of conventional banks and investment of Islamic banks 32
Table-12 Total Deposit. (Fig in million Tk) 32
Figure-8 Total deposit of Islamic and conventional banks 33
Table-13 Total NPAT of Islamic and conventional banks. (Fig in million Tk) 33
Figure-9 Analysis of Total NPAT of Islamic and conventional banks 34
Table-14 Average cost-income ratio 35
Figure-10 Average cost to income ratio of Islamic and conventional banks. 35
1
A Comparative Financial Performance Analysis between Conventional and Islamic
Banks in Bangladesh
Abstract
Islamic banking constitutes an important part in banking industry of Bangladesh. This report
based on the comparative financial performance analysis between Conventional banks and
Islamic banks in Bangladesh.
This report contains five chapters. The first chapter includes the introduction of the thesis
report, methodology and limitation of the study. The second chapter describes the previous
research and findings on this topic. The third chapter contains the comparison of Islamic
and conventional banking system, history of Islamic and conventional banking, elements of
Islamic banking and the basic difference between riba and profit.
The fourth chapter describes the financial performance analysis. Here some ratio analysis
for example ROA, ROE, Net Profit Margin ratio, cost-income ratio discussed to see which
banking system performed well in terms of profitability between Islamic and conventional
banks. Also discussed average EPS, capital adequacy ratio, average total amount of loan
and investment, total deposit and total NPAT of Islamic banks and conventional banks.
I have shown the comparative analysis and discussed of Conventional and Islamic Banks
and found here that Islamic Banks performed better in terms of profitability but conventional
banks performed better in terms of NPL.
In chapter five I have discussed the findings, recommendations and overall conclusion of
financial performance analysis of Islamic and conventional banks.
During the composition of the report proper care and uninterrupted concentration has been
invested. Moreover, containing some unintentional mistake and printing error is not usual.
I do hope all to be considered in this regard.
2
Banks in Bangladesh
Chapter-One
Introduction
3
Banks in Bangladesh
A bank is a financial institution accepting for the purpose of lending and Investment of
deposits of money from the public, repayable on demand or otherwise and withdraw able
by cheque, draft or otherwise. Its main function is to collect deposits from the public and
lend those for the development of agriculture, Industry, trade and commerce. They pay
interest at a lower rate to the depositors and receive interest at a higher rate in terms of loan
and advancement. This is called spread and this is the main sources of profit they earn. Most
country have institutionalized a system known as fractional reserve banking under which
banks needs to hold liquid assets equal to only a portion of their current liabilities. In
addition to other regulations intended to ensure liquidity, banks are generally subject to
minimum capital requirements based on an international set of capital standards, known as
the Basel Accords.
Banking in its modern sense advanced in the 14th century in the successful cities of
Renaissance Italy but in many ways was an extension of ideas and concepts of credit and
lending that had their roots in the ancient world.
1.1 Background of the Study:

A nation's monetary development relies upon different elements; among those components,
money related area execution is one of the key elements particularly the budgetary
foundations execution in that nation. Banking sectors performance plays a significant role
in the overall economic development of a country. A country is economically stable and
developed depends mainly on banking sector’s performance. It functions as an intermediate
to link surplus and deficit components provide funds to utilize in fruitful purposes thus
struggling for the economic development (Ansari and Rehman, 2010). In spite of the fact
that banks are existed contrastingly in most punctual occasions as well however in most
recent two decades mechanical insurgency have acquired an energizing progressive change
tasks, administration and execution of managing an account area. Today banks are joined
with numerous new items and administrations to flush the stream of assets in the economy
(Sehrish, Saleem and Yasir, 2012).
To spur a nation's economy; government does this with the assistance of "money related
instruments" through managing an account segment. The majority of the business and
monetary exchanges engaged with this procedure are overseen by banks. Not just points of
4
Banks in Bangladesh
interest turn out from regular managing account strategies there are burdens as well.
Significant emergency whether budgetary and monetary happened because of customary
banks strategies that are Global money related emergency (Faizulayev, 2011). IMF
considered the outcome of money related emergency on the execution of both Islamic and
Conventional banking segment and found that on a normal Islamic banking indicated more
grounded adaptability amid emergency. Be that as it may, when emergency hit genuine
economy Islamic banks confronted gigantic losses near to Conventional Banking division.
Islam is whole and far reaching lifestyle, which gives solidness between religious
commitments and materialistic needs of person. One of the fundamental needs of person is
to have a framework which gives appropriate laws or guidelines to budgetary administration
in their life. Each person have appropriate to consume their time on earth as indicated by
neither their will nor it is fundamental that one technique or one framework is legitimate
and satisfactory for all. Same as two diverse banking parts performing in the meantime in
Bangladesh; Conventional banks and Islamic banks (Amjad, Tahira, Akram and Usman,
2013).
Islamic banking depends on Shariah which does not permit interest (riba), theoretical and
untrustworthy exchanges rather it recommends to perform exchange dependent on hazard
sharing or profit and loss sharing, from now on, (PLS) sharing expecting genuine financial
exchange supported by genuine property (Beck et al., 2013). These nuts and bolts make
Islamic banks unique in relation to the conventional banking hypothetically. Say for
instance, interest based contract of conventional banks is supplanted with return in Islamic
banks where both hazard and profit or loss are shared among banks and the customers.
Furthermore, they utilize venture store and request store with the end goal to gather finance
from investors which are free from interest and dependent on hazard and PLS and increase
principles.
Be that as it may, as both conventional and Islamic banks are directed in same way and
worked in same aggressive condition, it is feasible for Islamic banks to embrace alike
techniques as conventional banks receive. Besides, as a general rule, the discoveries of
various writings demonstrate that Islamic banks are not really Islamic and not quite the same
as hypothesis. For example, Siddiqi (2006) discover more dependence of Islamic banks on
markup financing and less on PLS financing. In addition, at first Chong and Liu (2009) and
later Khan (2010) find that store activation of Islamic banks isn't without interest and just a
5
Banks in Bangladesh
little piece of venture financing depends on PLS worldview. All the more especially,
Bourkhis and Nabi (2013) locate that just under 20% of Islamic banks assets are activated
to long haul and hazard sharing financing.
Bangladesh is the principal nation in Southeast Asia where Islamic banking has been
presented with the foundation of Islami Bank Bangladesh Limited in March 30, 1983 (Kabir
et al., 2012). Presently the quantity of full-fledged Islamic banks progresses toward
becoming 8. Besides, 16 conventional banks including 3 universal banks additionally
manage Islamic banking items with the end goal to take care of the expanded demand of
Islamic banking in the nation. Likewise, the nation has been drilled a quick development in
Islamic banking since its origin which is ascribed to expanded piece of the pie and assets
development. Money related solidness report (2014) distributed by Bangladesh Bank (Note
4) reports that Islamic banking industry picks up piece of the overall industry of 18.8 percent
in absolute store and 21.6 percent in complete credit in 2013. Once more, Bangladesh is one
of a few slightest influenced nations in late GFC (Global Financial Crisis). One reason could
be the advancement of Islamic banking framework in Bangladesh (Wasiuzzaman and
Gunasegavan, 2013; Khediri et al., 2015). Besides, banking industry of Bangladesh might
be a remarkable case for researching relative implementation between Islamic banks and
conventional banks where there are 58 banks among them 8 full-fledged Islamic banks and
the rest16 are banks with Islamic branches and windows are working under Shariah
principle.
1.2 Objectives of the Study:

My main objective of writing this report is to fulfill the fractional desires of the EMBA
program. In this report, I will try to give a summary and will make comparison between two
type of banks regarding its operation; contribution and overall financial performance. There
are some objectives of this report:
 To make comparison among the banks based on ratios.

 To show the different products offered by the banks.
 To Identify the contribution in the economy of Bangladesh.
 To identify some pitfall and benefits in both principles.
6
Banks in Bangladesh
1.3 Methodology of the Study:
1. Research Type:
This is a descriptive study that briefly focuses on “A Comparative Financial Performance

Analysis between Conventional and Islamic Banks in Bangladesh”. Mainly secondary
data will be used to prepare this report. Annual reports of conventional and Islamic banks
are the major secondary data sources in this regard. This study has been made for the period
of 5 years from 2013 to 2017.
2. Sources of Data and Data Collection:
Data will be collected from the various secondary sources like research works of individuals,
different publications, journal of different institutions, annual reports of two banks etc.
3. Data analysis and reporting:
The study will be conducted using trend analysis. Computer Software- Microsoft Word,
Microsoft Excel, and Microsoft PowerPoint will also be used to analyze and reporting
purpose of collected data.
I will use these below mentioned ratios to compare the performance between selected
Islamic banks and conventional banks-
1. Earnings per Share.
2. Non-Performing Loan Ratio.
3. Cost to Income Ratio.
4. Return on Asset.
5. Return on Equity.
6. Capital Adequacy Ratio etc.
4. Sample Size:
7
Banks in Bangladesh
In Bangladesh 57 scheduled banks are operating and among them 8 banks are full fledge
Islamic bank. For my study I choose 2 sets of Banks. One set is representing Islamic banks
and the other is representing Conventional Banks. The samples are given below-
Islamic Banks Conventional Banks
1. Islami Bank Bangladesh Limited 1. Dutch Bangla Bank Limited
2. EXIM Bank Limited 2. Eastern Bank Limited
3. Social Islami Bank Limited 3. One bank Limited
Table-1: Sample of the study
1.4 Limitations of the Study:

Challenges exist in every piece of work. I also face many challenges which are appeared
in the way of conducting this study. However entire study has been conducted with an
intention to make it trustworthy and complete one. Some limitations of the study are:
 Time Period of the study is too short.

 Lack of experience to make descriptive and analytical report.
 Lack of profound knowledge to conduct such study.
 Lack of analytical ability to analyze such large data.
 3 Islamic banks from 8 and 3 conventional bank from 59 banks in our country
doesn’t represent the actual scenario.
8
Banks in Bangladesh
Chapter-Two
Literature Review
9
Banks in Bangladesh
Finance is essential for trade, business and industry. By and by a-days, banking industry
gives the best help to current business. Banking territory makes prepared for the headway
of a country. Banking has a long history. Bankers kept gold and silver and credited it to
others in Mesopotamia. Old Rome and Greece had relative banking systems that we are
following today. Italy was the principle focal point of European banking in the medieval
occasions.
Europe's biggest bank was built up by the Medici family who overwhelmed Florence city
for more than two centuries. In 1963, Islamic banking appeared on a trial premise in a
residential community of Egypt. The accomplishment of this investigation opened the
entryways for a different market for Islamic banking and back and subsequently, in 1970s
Islamic banking achieved its task to a moderate scale. Various full-fledge Islamic banks
were built up in Arab and Asian nations later on. In Bangladesh, Islamic banking was
presented in 1983 with the foundation of the main Islamic bank i.e. 'Islami Bank Bangladesh
Limited'.
The conventional banking speculations accept that banks acquire profits by getting stores
from the contributors at a low interest rate, at that point giving those assets to the borrowers
at a higher interest rate (Santos, 2000). In this manner, conventional banks have their profits
from the effect between the interest rate got from borrowers and the interest rate paid to
investors. Islamic banking plays out a similar capacity however in this framework interest
is entirely disallowed. That implies that they can't get a foreordained interest from borrowers
and does not pay a foreordained interest to the contributors. The measure of profits depends
on the profit-sharing concurrences with the investors and furthermore with the borrowers.
Likewise, there are charge based banking administrations that are like that polished by the
conventional banks insofar as there is no foreordained interest installment or get in the
exchange. Along these lines, Islamic banking is a different banking stream as it underpins
profit-sharing and disallows interest. The profit sharing relies upon the degree of the hazard
interest of the gatherings. The nonappearance of pre-decided prizes depends on Quranic
orders and as delineated utilizing Shariah principles.
Banks execution can be estimated both by utilizing subjective and quantitative strategies
and systems. Diverse factors and factual methods have been utilized for the investigation by
various examinations and results are drawn from them going for execution assessment.
Banks execution can be estimated regarding profitability, development, efficiency, liquidity,
10
Banks in Bangladesh
credit hazard execution, and dissolvability. There is a general understanding in writing that
Islamic banks are better than conventional or standard banks as far as their execution
(Samad, 2004; awan,2009; Rosly and AbuBakar, 2003; Safiullah, 2010). Keeping in view
the significance of banking division, diverse investigations have been completed for
assessing execution of banks.
Sujan, et al. (2013) inspected the execution of 5 conventional and 5 Islamic banks of
Bangladesh from period 2008-2012 on banks benefit and liquidity. Distinctive tests had
been used in choosing the significance of the differential execution of the two social
occasions of bank. The examination found differentiation on the gainfulness. Close by ROE,
ROA, EPS, P/E extent they in like manner thought about benefit per specialists and benefit
per part of the picked banks. Regardless, they found no enormous refinement in the liquidity
position of the banks.
Safiullah (2010) accentuated on the budgetary execution investigation of the two surges of
banks to quantify predominance. The examination demonstrated that money related
execution (business improvements, profitability, liquidity and dissolvability, promise to
economy and network, efficiency and profitability) of the two surges of banks is
outstanding. Study results, in light of promise to economy and network, profitability and
efficiency and meant that interest-based conventional banks were improving the situation
than sans interest Islamic banks. In any case, execution of sans interest Islamic banks in
business improvement, profitability, liquidity and dissolvability was better than that of
interest-based conventional banks. That is, relatively Islamic banks were better in monetary
execution than that of interest-based conventional banks.
Bader et, al. (2008), recorded that there is no distinction between efficiency of conventional
and Islamic banks that included cost, income and profit efficiency, in the wake of examining
execution of 43 Islamic and 33 conventional banks for the period 1990-2005 out of 21
nations utilizing Data Envelopment Analysis.
Iqbal (2001) utilized information for the 1990-98 periods. For this examination, an example
of twelve Islamic banks was picked. These banks have in excess of 75 percent of aggregate
capital and in addition add up to assets of "private" Islamic banks and accordingly frame a
substantial example. Thusly, it very well may be accepted that the outcomes got from this
example were illustrative of the "Islamic banking industry". For similar purposes, as an
example of twelve conventional banks was picked. These banks were chosen similar nations
11
Banks in Bangladesh
from where Islamic banks were picked. An endeavor was likewise made to pick banks
generally of indistinguishable size from the Islamic banks. A few speculations and basic
observations about the act of Islamic banking have been tried. The execution of Islamic
banks has been assessed utilizing both pattern and proportion examinations. For this reason,
some goal "benchmarks" for different proportions have been produced out of the blue. The
execution of Islamic banks has contrasted and a 'control gathering' of conventional banks.
It was discovered that, general Islamic banks have done genuinely well amid the period
under examination.
Islamic banking is without interest to take active part in business profit and loss sharing.
Sheik and Ali (2009) in their paper broke down the risk administration of Islamic banking
system by giving differential investigation of threat administration dependent on one of a
kind of attributes.
12
Banks in Bangladesh
Chapter-Three
Comparison between
Islamic and
Conventional Banking
13
Banks in Bangladesh
3.1 Islamic Banking in the World
Islamic saving money has been expressed as managing an account in solidarity with the
lifestyle respect technique of Islam and regulated and danger organization rules, by the
standards set around Islamic Shariah, known as Fiqh al-Muamalat (Islamic models on
trades). In Asia with the arrangement to end up comprehended countries are endeavoring to
attempt critical undertakings to enhance its money related. Islamic store is the viewpoint of
good contributing, moral crediting, beside that no advances are possible with the exception
of in the event that they are sans interest. Islamic resources could never purposefully put
resources into affiliations attracted with betting, mixed refreshments, or porcine sustenance
things. Its specialists and customers require not being Muslim yet rather they should
perceive the moral imperatives underscored by Islamic qualities.
When all is said in done, Islam forbids paying and accepting interest. Then again, the
profitability of capital is perceived. As an outcome, giving funding to a monetary action and
Profit loss sharing is allowed and additionally changing a higher cost for conceded
installments in exchange. These principles which pursues Islamic banking is based, are
generally acknowledged everywhere throughout the world, for a considerable length of time
as opposed to decades. These principles are not new in any case apparently their unique
state has been changed throughout the hundreds of years. It is obvious that Islamic banking
harmonized with the overall festival of the advert of the fifteenth Century of Islamic
schedule (Hijri) in 1976. "Islamic private enterprise", were created between the eighth and
twelfth hundreds of years. The fiscal economy of the period depended on broadly cash
flowed the gold dinar, and it integrated areas that already financially free.
Various monetary ideas and methods were connected in early Islamic banking, including
bills of trade, association (mufawada, including constrained organizations, or mudaraba),
and types of capital (al-mal), capital aggregation (nama al-mal), check, promissory notes,
trusts, value-based records, crediting, records and assignments. A significant number of
these early industrialist ideas were received and additionally progressed in medieval Europe
from the thirteenth century onwards.
14
Banks in Bangladesh
3.2 Conventional Banking in Bangladesh
Bangladesh is an under developed banking system, particularly in terms of the services and
customer care provided by the government run banks. Conventional banks are went through
to reproduce the banking structure of the more developed countries, this attempt is often
hindered by unskilled or politically encouraged government policies executed by the
Bangladesh Bank. The result of banking system raising corruption and illegal activities or
laundering. For this reason politically influenced people and criminals are making the
accomplishment of services or the performance of international transactions which
increasing the difficulty of the general citizens.
In every way that really matters all keeping money organizations were accumulated in urban
regions. The as of late self-governing government promptly allotted the Dhaka as a piece of
the State Bank of Pakistan which is renamed after freedom as Bangladesh Bank. The bank
was in custody of directing cash, controlling credit and financial approach, and regulating
trade control and the authority remote trade saves. Bangladesh government at first
nationalized the whole residential banking framework and continued to redesign and rename
the different banks. Outside claimed banks were certified to keep working together in
Bangladesh. The protection business turned into a source of potential assumption reserves.
Friendly credit frameworks and postal reserve funds offices held support of tiny individual
and provincial records. The new banking framework makes productive of supervision of
credit and outside trade. The basic role of the credit framework among the 1970s was to
found exchange and people in general segment, in which consumed 75 percent of aggregate
advances.
Toward the finish of 1970 and start of 1980 of agrarian extension and private industry
conveyed changes in their approaches which was prevailing by the BKB (Bangladesh Krishi
Bank), a keeping money establishment which is particular for horticulture, loaning to
agriculturists and anglers drastically expanded. As this bank is mostly for provincial
advancement that is the reason rustic branches had multiplied between 1977 to 1985, to in
excess of 3,330 workers. The private mechanical development goes through the Bangladesh
Bank and the World Bank is to center around their loaning on the rising private assembling
division. Planned bank moves to private horticulture, as a level of sectorial GDP, ascended
15
Banks in Bangladesh
from 2 percent in FY 1979 to 11 percent in FY 1987, while improvements of private
assembling division ascended from 13 percent to 53 percent.
To achieve the matters of advance recovery, It is remarkably normal for borrowers to default
on advances than to repay them; the loaning framework was basically providing award help
to private people who had met all requirements for credits more for political than for
financial causes. The recuperation rate on cultivating propels was only 27 percent in FY
1986, and the rate on power-driven advances was even standard. For this poor starter,
generous suppliers associated strain to initiate the organization and banks to make firmer
move to reinforce internal bank organization and credit discipline. That is the reason rates
of recuperation began to help in 1987. The National Commission on Money, Credit, and
Banking masterminded broad auxiliary changes in Bangladesh's game plan of fiscal
intermediation appropriate off the bank in 1987, a noteworthy advancement into a three-
year compensatory financing office set apart by Bangladesh with the IMF in February 1987.
Starting in late 1985, the administration sought after a tight money related strategy went for
constraining the development of local private credit and government acquiring from the
banking framework. The procedure was to a great extent effective in decreasing the
development of the cash supply and aggregate residential credit. Net credit to the
administration really declined in FY 1986. The issue of credit recuperation remained a
danger to financial soundness, in charge of genuine asset misallocation and brutal
imbalances. So the legislature had started successful measures to enhance money related
order, the draconian compression of credit accessibility controlled the danger of
coincidentally demoralizing new financial movement.
3.3 Islamic Banking in Bangladesh
Bangladesh is the 4th Muslim country in terms of population in the world. The general
population of this nation is touchy about their religious conviction. They need to lead there
financial life based on Islamic Sharia. At the primary they have no Islamic saving money
framework. Bangladesh marked the sanction of Islamic improvement bank and conceded to
rearrange its monetary and money related framework according to Islamic Shariah. First
16
Banks in Bangladesh
Islamic Bank began the Islamic keeping money framework that keeps running as indicated
by Islamic guidelines and directions.
The desire for the general population of this nation to bearing a managing an account
framework steady with Islamic standards which come into conviction after the OIC proposal
of its Foreign Ministers meeting in 1978 at Senegal to build up a different saving money
arrangement of their own. Islamic saving money was presented in Bangladesh path in 1983
by outside financial specialists from Saudi Arabia and Kuwait. The development and growth
of the Islamic banking industry in Bangladesh took a very steady course over the years.
The Islamic banking is indicating solid development since its beginning in 1983 in
accordance with the development of economy, as reflected by the expanded piece of the pie
as far as liabilities and assets of the aggregate banking industry. The aggregate stores of the
full-fledged Islamic banks and nearby banks including banking branches/windows of the
conventional banks remained at Tk. 830 billion toward the finish of December 2011 and
add up to speculation remained at Tk. 780 billion.
As the Central bank in Bangladesh BB (Bangladesh Bank) coordinates and manages the day
by day exercises and business of these banks as coordinated by Bangladesh Bank Order,
1972 and Bank Company Act, 1991. IBBL was the main Islamic bank in Bangladesh.
Establishments of Islamic banks in Bangladesh are given here close by their solidification,
posting status in securities trade and posting year.
17
Banks in Bangladesh
SL Name of Bank Year Of Listing Year of
Incorporation Status Listing
1. Islami Bank Bangladesh Limited (IBBL) 1983 Listed 1985
2. ICB Islamic Bank Limited (ICBIBL) 1987 Listed 1990
3. Al-Arafah Islami Bank Limited (AAIBL) 1995 Listed 1998
4. Social Islami Bank Limited (SIBL) 1995 Listed 2000
5. Export Import Bank of Bangladesh Limited 1999 Listed 2004
(EXIM)
6. First Security Islami Bank Ltd. (FSIB) 1999 Listed 2008
7. Shahjalal Islami Bank Limited (SJIBL) 2001 Listed 2007
8. Union Bank Limited (UBL) 2013 ------ ------
Table-2: Status of Islamic Bank in Bangladesh.
(Source: Journal of Islamic Banking and Finance Vol. 2, No. 1; March 2014)
3.4 Elements of Islamic Banking
The element of Islamic banking is not just the interest free receipt and use of fund. Most
important elements of Islamic banking are the profit and loss sharing basis. On the premise
of Islamic principles there are various types of Islamic financial instruments available in the
market. Some of the instruments are equity contracts and some of them are debt contracts.
They are explained below.
a) Musharaka: where a bank may join with other element to set up a joint endeavor,
the two gatherings are taking an interest in different parts of the venture. Profits are
separated on a pre-decided premise, and any misfortunes are likewise partaken in
extent to the capital commitment in Islamic banking framework.
b) Mudarabah: where the bank contributes with the fund and the customer gives the
18
Banks in Bangladesh
aptitude, administration and work. Profits are shared by the two accomplices in a
pre-masterminded extent when a misfortune happens the aggregate misfortune is
acknowledged by the bank.
c) Ijarah: In Islamic banking it very well may be characterized as a procedure by

which "usufruct of a specific property is exchanged to other individual in return for
a lease guaranteed from him". In numerous regards, Ijarah like renting as it is honed
in present business world. Under Ijarah, the bank or renting organization expect that
the danger of retreat or reducing interest for these assets.
d) Istisna: is one sort of offer where an item is overseen before it appears.

Notwithstanding, it is vital for the legitimacy of Istisna that the cost is settled with
the understanding of the gatherings. Likewise, the vital particulars of the item are
completely settled between them. The Buyer of the items is called as Al-Mustasni in
this agreement. The dealer known as Al-Sani. The wares or results of the agreement
are exemplifying as Al-Masnoo.
e) Salam or Bai-Salam: It is a deal assertion where purchaser paid full installment

ahead of time and vender assumes the liability to supply the items or wares for
certain time. In this assertion cost of the products paid ahead of time however hand
over the merchandise happens later. Salam deal is likewise used to back business
and modern exercises particularly in preceding creation and fare of items. That is,
by acquiring them on Salam and advertising them at lucrative costs.
3.5 Difference between Islamic banking and conventional banking
Islamic banking system totally follows the Law of Holy Quran and the Hadith which also
known as Shariah. Because of this basement of Islamic banking system, it is widely accepted
systems. There are many differences with the conventional system in the area of
responsibilities, investments, transactions, products etc. as conducted through one of the
distinguished philosophies. The foundation is built on Islamic faith and belief. Thus, Islamic
banks must remain narrowed with the borders of Islamic law in all its operations. In Islamic
banking system the relationship between a client and bank is not similar creditor and debtor.
Islamic bank is investing but not finance. The relation between client and banker is similar
19
Banks in Bangladesh
to partner. Coincidentally, conventional saving money framework depends on free
enterprise. The association between speculators, borrowers and financier resembles
indebted person and lender. Conventional banks don't contribute and their financing
depends on insurance. The benefit of financing in conventional bank is interest. "Exchange
resembles intrigue," however Allah hath is permitted exchange and illegal conspiracy. The
individuals who in the wake of tolerant heading from their Lord, stop, will be exculpated
for the past; their case is for Allah (to pass judgment); however, the individuals who repeat
(The offense) are partners of the Fire: They will stand in that (eternity) [2:275]
Point of difference Conventional Banking Islamic Banking
Business Function and operation modes Function and operating modes

are based on manmade are based on Islamic Shariah, the
principles. law of Holy Quran and Sunnah.
Framework Financing is based on Investing is based on profit or

predetermined interest rate. loss sharing system.
Interest Depositors receive interest and Account holder does not get
a guarantee of principle interest but share profit or loss of
payment. investment.
Risk sharing in Risk Sharing is not generally Offer equity financing basis of
equity financing offered. risk sharing for a project. Losses
are shared on the basis of the
proportion of equity and profit is
shared on the basis of pre agreed
ratio.
Restriction Conventional banks can Islamic banks cannot invest on

finance any legal products or any kind of project or products
project according to the that are Haram in Islamic view.
specific country law.
20
Banks in Bangladesh
Penalty on default Conventional banks imposed Islamic banks are not allowed to
additional money in case of charge penalty for their
default or late payment. enrichment.
Avoidance of Speculative investments are Speculative investments and

Gharar allowed here. elements of gambling is strictly
forbidden.
Customer Relationship with clients is Relationship with clients is like

Relationship like creditor and debtor. partner and investor.
Shariah supervisory Conventional banks do not Islamic banks must have a

board require such board. supervisory board to ensure
compliances with Shariah law.
Table-3: Differences between Islamic banking and conventional banking
(Source: The Research Foundation of CFA Institute)
In Islamic banking in those Islamic laws says that money itself has no intrinsic value. Wealth
can only be generated through appropriate trade and investment. Any advance relating to
this trading are shared between the person provides the capital and the person providing the
ability. Islamic banking system generates all of their profit through Shariah compliant with
trading and investment activities and profits are shared their customers at a pre-agreed ratio.
3.6 Difference between Riba and Profit
Riba Profit
1. Interest is expressed as RIBA which is 1. The net positive outcome from business
completely forbidden (Haram) in Islamic operation is known as profit.
System. Increasing or adding is the
meaning of RIBA.
21
Banks in Bangladesh
2. Riba can be fixed earlier, there is no 2. Profit can be determined later, so its
uncertainty. . amount can be known after the activity is
done.
3. Riba never become negative, most of the 3. Positive, zero or negative would be the
time it is very low or zero. amount of profit.
4. According to Islamic Shariah, riba is 4. Profit is acceptable and suggested against

strictly prohibited. riba.
5. Riba is not related with business. 5. Profit is related with business.
6. Riba is on the basis of loan. 6. Profit is on the basis of trade and

investment.
7. Time is the main element of riba. 7. Cost, market, sales, business transactions
are the main element of profit.
8. Lender is the beneficiary in riba. 8. Profit is shared by fund owner along with
entrepreneur.
9. Riba is not associated with the risk of 9. Profit is always surrounded by risk of
loss. loss.
Table-4: Differences between Riba and profit
22
Banks in Bangladesh
Chapter-Four
Financial
Performance Analysis
23
Banks in Bangladesh
4.1 Return on Asset:
Return on asset expressed by dividing net income after tax with total asset. It is the major
factor to measure the profitability of bank.
ROA= (Net income/Total asset) *100
2017 2016 2015 2014 2013
ROA of 1.06% 1.25% 1.12% 1.39% 1.05%

Islamic banks
ROA of 1.00% 1.08% 1.31% 1.42% 1.42%

conventional
banks
Table-5: Average ROA of Islamic and conventional banks.
Source: Annual Report.
From this table we can say that in 2017 the performance of ROA in Islamic banks is better
than conventional banks. In the last five years ROA of conventional banks are consistent.
On the other hand, Islamic banks are more unstable than conventional banks.
Average ROA
1.50% 1.42%
1.25% 1.39% 1.42%
1.06% 1.31%
1.08% 1.05%
1.00% 1.12%
1.00%
0.50%
0.00%
2017 2016 2015 2014 2013
ROA of Islamic banks ROA of conventional banks
Figure-1: Analysis of Average ROA
Source: Annual Report
This chart represents that in 2017 ROA of Islamic banks is 1.06 % where conventional banks
is 1.00%. Islamic banks are inconsistent but their trends are up warding. On the other hand,
24
Banks in Bangladesh
conventional banks are consistent but their trend is down warding. In 2014 to 2016
conventional banks perform well than Islamic banks. In 2013 conventional banks has greater
ROA than Islamic banks.
4.2 Return on Equity:

Return on equity expressed how much net income after tax generated against
shareholder’s equity. It is an important factor to measure the profitability of banks.
Return on equity = (Net income/shareholder’s equity) *100
2017 2016 2015 2014 2013
ROE of 10.69% 12.40% 10.56% 11.89% 10.85%

Islamic
banks
ROE of 11.41% 13.03% 15.62% 15.88% 15.72%

conventional
banks
Table-6: Average ROE of Islamic and conventional banks.
This table represent that in 2017 ROE of conventional banks is greater than Islamic banks.
In 2013 to 2016 it increases year to year. So that we can say that conventional banks are
better than Islamic banks. And the trend is up warding and consistent. On the other hand,
Islamic banks are unstable.
Average ROE
20.00%
15.00% 13.03% 15.88% 15.72%

15.62% 11.89%
10.70% 10.56% 10.85%
12.40%
10.00%
11.41%
5.00%
0.00%
2017 2016 2015 2014 2013
ROE of Islamic banks ROE of conventional banks
Figure-2: Average ROE of Islamic and conventional banks
25
Banks in Bangladesh
The chart shows that conventional banks are well performed than Islamic banks. In last
five years conventional banks are upward trend. ROE of Islamic banks has down ward. In
2014 ROE of conventional banks was 15.88% where Islamic banks were 11.89%. So that
it is clear conventional banks are good position.
4.3 Net Profit Margin Ratio:

Important indicator for banks profitability. Profit margin ratio expresses the net earnings
from the total revenue. Scenario of last five year’s profit margin ratio of both Islamic and
conventional banks given below.
2017 2016 2015 2014 2013
Net Profit 13.20% 9.81% 8.43% 9.52% 8.18%

Margin ratio of
Islamic banks
Net Profit 11.80% 8.85% 10.52% 9.81% 10.60%

Margin ratio
conventional
banks
Table-7: Average profit margin ratio of Islamic and conventional banks
In 2017 both the Islamic and conventional banks earn well and in their earnings deviation
was too low. In 2013 and 2015 conventional banks has done comparatively better. But in
2016 earnings of Islamic banks is better than that of conventional banks.
26
Banks in Bangladesh
Profit Margin Ratio
14.00%
13.20%
12.00%
11.80% 9.81% 10.52% 9.81%
10.00% 10.60%
8.43% 9.52% 8.18%
8.00% 8.85%
6.00%
4.00%
2.00%
0.00%
2017 2016 2015 2014 2013
Net Profit Margin ratio of Islamic banks

Net Profit Margin ratio conventional banks
Figure-3: Analysis of profit margin ratio of Islamic & conventional banks.
In the graph it has been seen that profit margin ratio of conventional banks in a declining
trend. In 2015 it took an upturn but cannot stable in 2016. In recent year of 2017 the ratio is
11.80%. On the other hand, Islamic bank’s profit margin is more unstable. In 2017 Islamic
banks profit margin ratio is 13.20% which is better than conventional banks. In the year of
2013 to 2015 conventional banks are better than Islamic banks. In 2016 Islamic banks are
perform well. But Islamic banks are more volatile.
27
Banks in Bangladesh
4.4 Earnings Per Share:
Earnings per share are an indicator to measure of company’s profitability. It allocates profit
of a firm to a per share basis. The higher EPS is the major objective of every bank.
EPS= (Net Income-Dividends on Preferred Stock)/Outstanding shares.
2017 2016 2015 2014 2013
EPS of
2.67 2.11 2.37 2.15
Islamic banks 2.38
EPS of
conventional 6.18 5.23 7.33 6.15 5.68
banks
Table-8: Average EPS of Islamic and conventional banks
EPS of coventional & Islamic banks

8
7.33
7
6 6.15 6.18
5.68
5 5.23
3
2.67
2.15 2.37 2.38
2 2.11
0
2013 2014 2015 2016 2017
Figure-4: Average EPS of Islamic and conventional banks
From this chart EPS of conventional banks is better than Islamic banks. In 2017 EPS of
conventional bank is 6.18 which is better than Islamic bank. And in 2013 to 2016 EPS of
conventional banks are more consistent.
28
Banks in Bangladesh
4.5 Capital Adequacy Ratio:
A significant ratio which is used to protect depositors and promote the stability and
efficiency of financial system of banks. It indicates that the banks have how much cushion
to absorb a future contingency or loss before become insolvent. So higher the bank’s
capital adequacy ratio, the higher the degree of protection of depositors’ asset.
2017 2016 2015 2014 2013
CAR of 11.65% 11.38% 12.01% 11.96% 13.01%

Islamic
banks
CAR of 13.38% 14.03% 12.96% 13.50% 12.58%

conventional
banks
Table-9: Average Capital Adequacy Ratio
This table shows the Capital Adequacy Ratio of Islamic and conventional banks.
Conventional are better position. In 2013 Islamic banks Capital Adequacy Ratio is 13.01%
where conventional banks are 12.58%. But conventional banks are more consistent. The
higher this ratio is indicating more secured in future.
Capital Adequacy Ratio

15.00% 12.96% 13.50% 12.58%
13.38%
14.03%
13.01%
11.65% 11.38% 12.01% 11.96%
10.00%
5.00%
0.00%
2017 2016 2015 2014 2013
Capital Adequacy Ratio of Islamic banks

Capital Adequacy Ratio of conventional banks
Figure-5: Average Capital Adequacy Ratio
29
Banks in Bangladesh
From this graph conventional banks are well in their capital management. In 2017 capital
adequacy ratio of conventional banks is 13.38% while Islamic banks are 11.65 %. In the
financial year of 2014 to 2016 conventional banks are better than Islamic banks. On the
other hand, Islamic banks are more volatile. The higher the capital adequacy ratio means
the security for future loss. So that conventional banks depositors are more secured than
Islamic banks.
4.6 Non-Performing Loan Ratio:

Non-Performing Loan ratio is to measure the performance of all banks. This ratio is a vital
factor of profitability of banks. NPL ratio indicates the efficiency of banks to provide loans
and all activities in providing investments or loans.
NPL Ratio= (Total Non-Performing Loan/Total amount of outstanding loans)*100
2017 2016 2015 2014 2013
Classified 5.7% 4.5% 4.3% 4.3% 4.4%

Investment to total
Investment of
Islamic banks
Classified loans to 4.17% 4.3% 3.5% 4.5% 4.1%

total loan of
conventional banks
Table-10: Average NPL Ratio.
From this table NPL Ratio in 2017 of Islamic banks is 5.7% on the other hand conventional
banks is 4.17%. But in financial year of 2013 to 2016 of both categories’ banks are quite
similar.
30
Banks in Bangladesh
NPL Ratio
Classified Investment to total Investment of Islamic banks
NPL of conventional banks
6.00%
5.7…
5.00% 4.50% 4.30%
4.17% 4.40%
4.00% 4.30% 4.30% 4.50% 4.10%
3.00% 3.50%
2.00%
1.00%
0.00%
2017 2016 2015 2014 2013
Figure-6: Average NPL Ratio
This table shows the average NPL ratio of conventional and Islamic banks. Both categories
of banks are comparable in their position. So that investment and lending of Islamic and
conventional banks are efficient.
4.7 Total amount of Loan of conventional banks and Investment of

Islamic banks:
2017 2016 2015 2014 2013
Total 1,213,001.00 1,074,340.85 961,284.69 851,397.53 704,940.28

Investment
of Islamic
banks
Total Loan 561,677.40 457,565.80 389,245.00 333,213.00 285,905.80

of
conventional
banks
Table-11: Total Loan & Investment (in million Tk)
31
Banks in Bangladesh
This table represents the total loans of conventional banks and investment of Islamic banks.
The higher total loan and investment of banks indicate the better position.
TOTAL LOAN & INVESTMENT

1,213,001.00
Total Investment of Islamic banks Total Loan of conventional banks
1,074,340.85
961,284.69
851,397.53
704,940.28
561,677.40
457,565.80
389,245.00
333,213.00
285,905.80
2017 2016 2015 2014 2013
Figure-7: Total loan of conventional banks and investment of Islamic banks
From this chart Total investment of Islamic banks has higher than total loan of conventional
banks. Here the business size of Islamic banks is larger than conventional banks. So that
Islamic banks are increasing their business and attract new investment sectors.
4.8 Total Deposit of Islamic and conventional banks:
2017 2016 2015 2014 2013
Total Deposit 1,241,791.00 1,120,140.38 989,903.72 885,240.31 740,637.02

of Islamic
banks
Total Deposit 583,819.00 500,946.00 446,007.00 383,849.30 348,900.00

of
conventional
banks
32
Banks in Bangladesh
Table-12: Total Deposit. (Fig in million Tk)
From this table Islamic banks are higher Total deposit than conventional banks. In 2017,
Islamic Banks of total Deposit is 1,241,791.00 million takas while conventional banks are
583,819.00 million takas. In 2013 to 2016 of total Deposit of Islamic banks are better
position and consistent.
TOTAL DEPOSIT
1,241,791.00
Total Deposit of Islamic banks Total Deposit of conventional banks

1,120,140.38
989,903.72
885,240.31
740,637.02
583,819.00
500,946.00
446,007.00
383,849.30
348,900.00
2017 2016 2015 2014 2013
Figure-8: Total deposit of Islamic and conventional banks
This graph shows the collection of deposit of Islamic and conventional banks. The deposit
of Islamic banks is larger which indicates its trustworthiness, confidentiality and popularity.
In the year of 2013 to 2017 shows that Islamic banks are more deposit collection than
conventional banks. So it is clear that Islamic banks are more efficient in deposit collection.
4.9 Total NPAT of Islamic and conventional banks:
2017 2016 2015 2014 2013
Total NPAT 9455.43 9796.93 7188.22 8368.46 8054.39

of Islamic
banks
33
Banks in Bangladesh
Total NPAT 7041.20 6479.6 7163.3 6409.6 5917.8
conventional
banks
Table-13: Total NPAT of Islamic and conventional banks. (Fig in million Tk)
This table represents the total Net profit after tax of both categories’ banks. In these analysis
Islamic banks is better position.
Total NPAT
12000
9455.43 9796.93
10000
8368.46 8054.39
8000 7041.2 7188.22
7163.3
6479.6 6409.6
5917.8
6000
4000
2000
0
2017 2016 2015 2014 2013
Total NPAT of Islamic banks Total NPAT conventional banks
Figure-9: Analysis of Total NPAT of Islamic and conventional banks
From this chart indicate that Total NPAT of banks where Islamic banks has greater NPAT.
In 2017 Total NPAT of Islamic banks is 9455.43 million takas while conventional banks
are 7042.1 million takas. In FY 2013 to 2016 Islamic banks are better position and
increasing the total NPAT. On the other hand, conventional banks are volatile. So, it is clear
Islamic banks are expanding their business and involving new market.
4.10 Cost to Income Ratio:

The cost to income ratio measures operating costs as a percentage of operating income. A
bank which operates a low cost can earn optimized return. The lower cost indicates the
efficiency of banks.
34
Banks in Bangladesh
Cost to Income Ratio= Total cost/ Total income.
2017 2016 2015 2014 2013
Cost-Income 53.06% 54.31% 52.49% 52.08% 53.86%

ratio of
Islamic banks
Cost-Income 47.69% 52.43% 50.64% 49.76% 52.38%

ratio of
conventional
banks
Table-14: Average cost-income ratio.
From the table shows the average Cost-income ratio of both Islamic and conventional banks.
The lower cost indicates the better performance. In this analysis conventional banks are
better in their position. But both banks are successful to keep their ratio below 55%.
Cost-Income Ratio
Cost-Income ratio of Islamic banks
Cost-Income ratio of conventional banks
56.00%
54.00% 53.86%
54.31% 52.49% 52.08%
52.00% 53.06%
52.43% 50.64% 52.38%
50.00% 49.76%
47.69%
48.00%
46.00%
44.00%
2017 2016 2015 2014 2013
Figure-10: Average cost to income ratio of Islamic and conventional banks.
By seeing this graph, we can say conventional banks are more efficient to minimize the cost.
In 2017 Islamic banks is 53.06% while conventional banks are 47.69%. In 2013 to 2016
conventional banks have lower cost than Islamic banks. So conventional banks are in better
position to minimize cost and able to earn more profit.
35
Banks in Bangladesh
Chapter-Five
Findings,
Recommendation and
Conclusion
36
Banks in Bangladesh
5.1 Findings:
 Islamic banks have good prospects in our country. As the Islamic banks meet both
banking and ethical expectation, the people of the country have reposed a great deal of
trust & confidence on them.
 The Islamic banks are facing problems of lack of manpower having proper Islamic
banking knowledge due to nonexistence of appropriate and institutional supply line of
Islamic bankers.
 Islamic banks operate on Islamic principles of profit and loss sharing, avoiding interest,
which is the root of all exploitation and responsible for inflation and unemployment.
 Islamic banks are determined to dispose of disparity and set up value in the economy,
and trade, exchange and industry; gather social-fiscal system and make business
opportunity.
 Absence of Islamic money market, shortage of skilled manpower, lack of regulatory
supervisory framework and shortage of link institutions are some of example of
constraints for practicing Islamic banking operation.
 Sometimes people become discouraged to deposit their money to the Shariah practiced
bank as are to share the loss if any incurred out of investment made from Mudarabah
Deposits.
 Islamic banks need a distinct organization & management structure to suit their
purposes, but the branch is established on traditional organization and management
structure.
 Islamic banks operate on Bai-Murabaha, Bai-Salam, Bai-Mudaraba, Istina, Hire
Purchase etc. For this reason, people fail to understand the real difference between the
conventional banking and Islamic banking.
 Clients have no Shariah information particularly in regard of Riba, restriction and so
forth in monetary exchanges. Without the essential information of Shariah and the idea
of Halal and Haram Islamic saving money has turned into a troublesome errand.
37
Banks in Bangladesh
5.2 Recommendations:
To sustain and develop the Islamic banking system of the country has to strive to solve the
problems mentioned in the findings, which stand in the way of their growth and survival.
The recommendations may be the following:
 The people of our country think that Islamic banks are only for Muslims. To change
these misconceptions Islamic banks, need to motivate them to follow their principles.
They should know the basic difference between conventional and Islamic banking.
 To motivate all religion people Islamic banks, need to increase their marketing,
advertising and promotional activities of their products and services to expand their
business.
 Banking industry are digitalized day by day. Conventional banks are more digitalized
than Islamic banks. For this purpose, Islamic banks starts to deliver e-banking services.
Conventional banks are more technologically strong than Islamic banks. So that Islamic
banks are increased their technological facility.
 All of the people who working in Islamic banks should be well conversant with Islamic
banking modes and its operations.
 The regulation and supervision of Bangladesh Bank and its massive training program
on Islamic banking both at home and abroad should be equally familiar with different
operational methodologies of the Islamic banking.
 In banking business Islamic banking are little bit backward than conventional banking.
So that Islamic banks take some attempt to enhance their business.
 Government of our country has crucial responsibility in promotion and development of
Islamic banking system. Government should make a financial system where Islamic
banks can contribute.
38
Banks in Bangladesh
5.3 Conclusion:
The concept of Islamic banking is recent innovation in banking industry. At the beginning
the world was not familiar with Islamic banking. At present among the 57 scheduled banks
8 are conducted through Islamic Shariah. In the banking system was only understood a
capitalist system based on interest. But Islamic banking system has its unique feature of
interest free system. The major point around which Islamic banking system revolved is the
straight departure from interest. Based on the Shariah law all dealing, transaction, business
approach, product feature, investment, focus, responsibility of Islamic banking lead to the
significant difference in many parts of the operations with as of the conventional. Islamic
banks in Bangladesh have less market share than the conventional banks with approximately
18%. For this reason, the lesser profitability and liquidity of Islamic banks than conventional
banks. The growth of Islamic banks in our country is progressing day by day. The
remarkable shifting or conversion of the conventional banks and their branches into the
Islamic lines, signals high acceptance of the interest free banking by the public in general.
Though Islamic banks are facing some legal and practical constraints. But few minor
changes in their practices, Islamic banking can get rid of all their burdensome and offer an
effective interest free banking. Diversification in service, profit oriented products will not
attract people to choose Islamic banks but it is the method of Profit Loss Sharing (PLS)
principle and Shariah law which should be strictly follow by Islamic banks to attract
Muslims and non-Muslims.
39
Banks in Bangladesh
Reference
Ali, S. (2009). ISLAMIC AND CONVENTIONAL BANKING COMPARATIVE

ANALYSIS Bank, M. (2011). Takaful. Meezan Bank Karachi.
Annual Reports: Islami Bank Bangladesh Ltd. (2013-2017)
Social Islami Bank Bangladesh Ltd. (2013-2017)
Export Import Bank of Bangladesh Ltd. (2013-2017)
Dutch Bangla Bank Ltd. (2013-2017)
Eastern Bank Ltd. (2013-2017)
One Bank Ltd. (2013-2017)
Iqbal, M.(2001). Islamic and conventional banking in the nineties: a comparative study.
Islamic Economic Studies, 8(2), 1-27.
Islamic Banking Scenario of Bangladesh by Salahuddin Yousuf, Md. Ariful Islam, Md.
Rayhan Islam published in Journal of Islamic Banking and FinanceVol. 2, No. 1; March
2014.
Metwally, M.(1997). Differences between the financial characteristics of interest-free banks

and conventional banks. European Business Review, 97(2), 92-98.
Moin, M. S.(2008). Performance of Islamic Banking and Conventional Banking in Pakistan:

A Comparative Study. University of Skövde.
Samad, A. (2004). Performance of interest-free Islamic banks vis-à-vis interest-based

conventional banks of Bahrain. IIUM Journal of economics and management, 12(2), 1- 15.
Sarker, M. A. A.(1999). Islamic Banking in Bangladesh: Performance, Problems, and

Prospects. International Journal of Islamic Financial Services, 1(3), 15-3
40
Banks in Bangladesh
Appendix
Islami Bank Bangladesh Limited:
2013 2014 2015 2016

2017
(Year)
(Year) (Year) (year)
(year)
Balance Sheet
Total assets 549,979,115,808 651,579,483,721 725,768,116,154 797,926,560,214 899,599,143,024.00
Total liabilities 506,190,441,939 604,994,926,369 678,475,469,999 749,080,105,283 848,935,014,010.00
Shareholders' equity 43,788,673,869 46,584,557,352 47,292,646,155 48,846,454,931 50,663,895,627.00
Total liabilities and

549,979,115,808 651,579,483,721 725,768,116,154 797,926,560,214 899,599,143,024.00
shareholders' equity
Book Value Per

29.92 28.93 29.37 30.34 31.47
Share
Paid up capital 14,636,278,800 16,099,906,680 16,099,906,680 16,099,906,680 16,099,906,680.00
Income statement
Net interest income 17,245,184,818 18,517,018,871 19,307,558,391 23,396,802,611 25,568,684,569.00
Total operating
25,346,295,252 27,470,966,151 28,065,054,309 32,031,429,440 35,979,562,038.00
income
Total operating
11,064,941,178 12,103,269,458 13,499,908,191 17,726,852,446 18,797,091,000.00
expenses
Profit before
provision against 14,281,354,074 15,367,696,693 14,565,146,118 14,304,576,994 17,182,471,038.00
loans and advances
Total provision 3,074,462,401 4,824,018,592 5,519,616,059 3,873,605,313 4,709,345,615.00
Profit before tax 11,206,891,673 10,543,678,101 9,045,530,059 10,430,971,681 12,473,125,423.00
Net profit after tax 5,055,362,131 3,967,416,860 3,150,366,725 4,479,338,303 4,920,606,745.00
Audited EPS 3.45 2.46 1.96 2.78 3.06
41
Banks in Bangladesh
Social Islami bank Limited:
2017
2013 2014 2015 2016
(Year)
(year) (Year) (Year) (year)
Balance Sheet
Total assets 126,401,393,912 153,737,467,324 180,008,645,008 227,815,302,848 276,290,476,647.00
Total
115,309,146,241 141,594,083,930 167,053,528,481 213,621,972,430 262,106,808,640.00
liabilities
Shareholders'
11,092,246,074 12,143,383,394 12,955,114,882 14,193,328,708 14,183,666,210.00
equity
Total
liabilities and
126,401,393,912 153,737,467,324 180,008,645,008 227,815,302,848 276,290,476,647.00
shareholders'
equity
Book Value
15.78 17.27 18.42 19.22 19.21
Per Share
Paid up
7,031,415,640 7,031,415,640 7,031,415,640 7,382,986,420 7,382,986,420.00
capital
Income statement
Net interest
3,945,724,495 4,936,065,194 6,290,880,054 7,389,880,105 7,983,957,388.00
income
Total
operating 5,560,461,585 6,710,875,951 8,291,920,861 9,714,417,518 10,984,481,514.00
income
Total
operating 2,595,704,395 2,746,601,272 3,447,296,758 3,986,805,828 4,757,625,673.00
expenses
Profit before
provision
against loans 2,964,757,190 3,964,274,679 4,844,624,103 5,727,611,690 6,226,855,841.00
and
advances
42
Banks in Bangladesh
Total
905,814,660 656,756,813 1,385,464,159 1,522,397,830 2,665,054,321.00
provision
Profit before
2,058,942,530 3,307,517,866 3,459,159,944 4,205,213,860 3,561,801,520.00
tax
Net profit
1,252,134,346 1,903,724,927 2,046,298,806 2,291,047,901 1,464,518,723.00
after tax
Audited EPS 1.78 2.71 2.91 3.1 1.98
Exim bank Limited

2013 2014 2015 2016 2017
(Year) (Year) (Year) (Year) (Year)
Balance Sheet
Total assets 195,542,247,525 232,411,858,595 265,148,415,926 291,133,912,333 333,892,609,356.00
Total
175,043,104,273 209,306,566,948 240,025,992,999 264,666,163,217 306,242,240,299.00
liabilities
Shareholders'
20,499,044,181 23,105,291,647 25,122,342,525 26,467,658,254 27,650,267,724.00
equity
Total
liabilities and
195,542,247,525 232,411,858,595 265,148,415,926 291,133,912,333 333,892,609,356.00
shareholders'
equity
Book Value
17.72 18 17.79 18.74 19.58
Per Share
Paid up
11,566,347,820 12,838,646,080 14,122,510,680 14,122,510,680 14,122,510,680.00
capital
Income statement
Net interest
5,052,849,361 6,994,173,611 7,885,606,053 7,874,684,904 6,425,836,851.00
income
43
Banks in Bangladesh
Total
operating 8,284,131,946 10,219,123,911 10,918,830,250 10,996,322,494 11,022,806,128.00
income
Total
operating 3,331,424,338 4,215,365,878 4,531,882,156 5,047,083,969 5,065,793,005.00
expenses
Profit before
provision
4,952,707,608 6,003,758,033 6,386,948,094 5,949,238,525 5,957,013,123.00
against loans
and advances
Total
1,713,952,876 1,596,842,988 2,722,635,168 950,761,779 632,751,869.00
provision
Profit before
3,238,754,732 4,406,915,045 3,664,312,926 4,998,476,746 5,324,261,254.00
tax
Net profit
1,885,608,260 2,480,927,888 2,086,545,593 3,039,764,146 3,298,428,234.00
after tax
Audited EPS 1.63 1.93 1.48 2.15 2.34
Dutch Bangla Bank Limited
2013 2014 2015 2016

2017
(Year)
(Year) (Year) (Year) (Year)
Balance Sheet
Total assets 185,537,386,894 215,993,545,862 244,057,570,324 266,153,344,593 311,906,776,777.00
Shareholders'
12,641,720,584 14,517,439,362 16,754,335,478 17,590,792,616 19,482,191,394.00
equity
Total liabilities
and
185,537,386,894 215,993,545,862 244,057,570,324 266,153,344,593 311,906,776,777.00
shareholders'
equity
44
Banks in Bangladesh
Book Value Per
63.21 72.59 83.77 87.95 97.41
Share
Paid up capital 2,000,000,000 2,000,000,000 2,000,000,000 2,000,000,000 2,000,000,000.00
Income statement
Net interest
7,337,379,548 8,333,929,239 9,787,994,590 9,878,187,660 11,489,362,322.00
income
Total operating
12,697,851,341 13,868,758,481 15,608,794,373 15,844,803,753 18,510,586,007.00
income
Total operating
8,114,280,579 8,544,397,678 9,174,853,138 10,403,304,020 12,827,085,403.00
expenses
Profit before
provision
4,583,570,762 5,324,360,803 6,433,941,235 5,441,499,733 5,683,500,604.00
against loans
and advances
Total provision 1,036,543,042 805,600,797 166,601,376 2,269,498,998 390,212,113.00
Profit before
3,547,027,720 4,518,760,006 6,267,339,859 3,172,000,735 5,293,288,491.00
tax
Net profit after

2,000,762,327 2,206,623,673 3,020,282,208 1,022,272,219 2,455,248,014.00
tax
Audited EPS 10 11.03 15.1 5.11 12.28
One bank Limited
2013 2014 2015 2016

2017
(year)
(Year) (Year) (Year) (Year)
Balance Sheet
Total assets 102,635,950,909 121,712,495,690 154,126,620,162 188,122,242,302 227,012,482,591.00
Shareholders'
8,394,054,021 9,583,366,834 10,885,182,699 12,578,949,890 14,218,815,361.00
equity
45
Banks in Bangladesh
Total liabilities
and
102,635,950,909 121,712,495,690 154,126,620,162 188,122,242,302 227,012,482,591.00
shareholders'
equity
Book Value Per

17.61 18.28 18.45 6.53 19.48
Share
Paid up capital 4,767,070,020 5,243,777,020 5,899,249,140 19,263,263,421 7,300,320,800.00
Income statement
Net interest
2,988,667,274 4,332,399,608 4,553,649,947 4,341,219,443 4,924,877,558.00
income
Total operating
5,391,981,330 7,122,745,335 7,686,031,529 8,363,871,960 9,795,665,608.00
income
Total operating
2,993,743,363 3,272,139,136 3,511,657,700 3,972,917,102 4,514,269,255.00
expenses
Profit before
provision
2,398,237,967 3,850,606,199 4,174,373,829 4,390,954,858 5,281,396,353.00
against loans
and advances
Total provision 693,109,907 1,112,630,103 1,528,522,068 1,083,460,722 1,409,458,856.00
Profit before
1,705,128,060 2,737,976,096 2,645,851,761 3,307,494,136 3,871,937,497.00
tax
Net profit after

1,277,186,579 1,631,216,753 1,869,876,262 2,421,212,008 2,632,457,462.00
tax
Audited EPS 2.68 3.11 3.17 3.64 3.61
46
Banks in Bangladesh

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Table-1 Sample of the study 8

Table-2 Status of Islamic Bank in Bangladesh. 18

Table-3 Differences between Islamic banking and conventional banking 20

Table-4 Differences between Riba and profit 21

Table-5 Average ROA of Islamic and conventional banks. 24

Figure-1 Analysis of Average ROA 24

Table-6 Average ROE of Islamic and conventional banks. 25

Figure-2 Average ROE of Islamic and conventional banks 25

Table-7 Average profit margin ratio of Islamic and conventional banks 26

Figure-3 Analysis of profit margin ratio of Islamic & conventional banks. 27

Table-8 Average EPS of Islamic and conventional banks 28

Figure-4 Average EPS of Islamic and conventional banks 28

Table-9: Average Capital Adequacy Ratio 29

Figure-5 Average Capital Adequacy Ratio 29

Table-10 Average NPL Ratio. 30

Figure-6 Average NPL Ratio. 31

Table-11 Total Loan & Investment (in million Tk) 31

Figure-7 Total loan of conventional banks and investment of Islamic banks 32

Table-12 Total Deposit. (Fig in million Tk) 32

Figure-8 Total deposit of Islamic and conventional banks 33

Figure-9 Analysis of Total NPAT of Islamic and conventional banks 34

Table-14 Average cost-income ratio 35

Figure-10 Average cost to income ratio of Islamic and conventional banks. 35

1.1 Background of the Study:

1.2 Objectives of the Study:

 To make comparison among the banks based on ratios.

This is a descriptive study that briefly focuses on “A Comparative Financial Performance

2. Sources of Data and Data Collection:

3. Data analysis and reporting:

1. Earnings per Share.

2. Non-Performing Loan Ratio.

3. Cost to Income Ratio.

6. Capital Adequacy Ratio etc.

Islamic Banks Conventional Banks

1. Islami Bank Bangladesh Limited 1. Dutch Bangla Bank Limited

2. EXIM Bank Limited 2. Eastern Bank Limited

3. Social Islami Bank Limited 3. One bank Limited

Table-1: Sample of the study

1.4 Limitations of the Study:

 Time Period of the study is too short.

3.3 Islamic Banking in Bangladesh

Incorporation Status Listing

1. Islami Bank Bangladesh Limited (IBBL) 1983 Listed 1985

2. ICB Islamic Bank Limited (ICBIBL) 1987 Listed 1990

3. Al-Arafah Islami Bank Limited (AAIBL) 1995 Listed 1998

4. Social Islami Bank Limited (SIBL) 1995 Listed 2000

5. Export Import Bank of Bangladesh Limited 1999 Listed 2004

6. First Security Islami Bank Ltd. (FSIB) 1999 Listed 2008

7. Shahjalal Islami Bank Limited (SJIBL) 2001 Listed 2007

8. Union Bank Limited (UBL) 2013 ------ ------

Table-2: Status of Islamic Bank in Bangladesh.

3.4 Elements of Islamic Banking

c) Ijarah: In Islamic banking it very well may be characterized as a procedure by

d) Istisna: is one sort of offer where an item is overseen before it appears.

e) Salam or Bai-Salam: It is a deal assertion where purchaser paid full installment

3.5 Difference between Islamic banking and conventional banking

Point of difference Conventional Banking Islamic Banking

Business Function and operation modes Function and operating modes

Framework Financing is based on Investing is based on profit or

Restriction Conventional banks can Islamic banks cannot invest on

Avoidance of Speculative investments are Speculative investments and