Financial performance of Islamic bank in Malaysia during and after economic crisis

• Main Authors: Kadir, Norhidayah A., Nur Lina Abdullah, Harun, Nurzalina, Noraimi Azlin Nordin, Jaffar, Aidatullaini
• Format: Conference Proceeding
• Language: English
• Subjects: Banking; economic crisis; financial ratio; Gold; inter-temporal comparison; Investments; Islamic bank; Profitability; statistical descriptive; Stress; Uninterruptible power systems
• DOI: 10.1109/CHUSER.2011.6163855

In this paper, we examine and evaluate the financial performance of an Islamic bank in Malaysia over two periods of time, during economic crisis (1997-1999) and after economic crisis (2001-2003). In order to see the Islamic bank's performance over these two periods of time, the study uses 10 financial ratios which are broadly categorized into 4 groups: (a) profitability ratios; (b) liquidity ratios; (c) risk and solvency ratios; and (d) efficiency ratios. Next, the study used T-test in determining the significance of the differential performance of the two periods of time. By using inter-temporal comparison, the study found that, in terms of profitability, even though it shows the ups and downs of the Islamic bank under study, overall they manage to recover their profitability by correcting their view in managing their system. The similar trend between the liquidity ratios indicates that Islamic bank have excessive liquidity and hence less risky. This can be true also for risk and solvency ratios as Islamic bank preferred to be less risky and this may due to greater shareholders' equity that they have. As an overall, Islamic bank shows an improvement in the efficiency of the managerial system with the increment that they show in efficiency ratios. Future studies can be done in comparing between Malaysian conventional bank with Islamic bank to find whether there exist any significance differences of its financial performance between these two periods of time.