Abstract
Performance analysis of Malaysian Islamic banks is the main aim of this study. Three performance indicators, namely Profitability, Liquidity, and Credit risk of the banks are being analyzed. Data collected is standardized to 2010 prices as per the wholesale price index of Malaysia equal to 100. The obtained data is analyzed with the help of ratio analysis. Under profitability performance, the Real return on assets ratio and Real return on equity ratio are analyzed. Under liquidity performance, the Real net loan to total asset ratio, Real liquid asset to customer deposit ratio, and Real net loan to total deposits and borrowings ratio are analyzed. Under Credit risk performance, Real Common equity to total asset ratio, Real Total equity to net loan ratio, and Real Impaired loans to net loan ratio is analyzed. Two major findings of the study are: (i) the liquidity risk of all the banks has increased which has resulted in a decline in the convertibility of banks to convert its assets into face value; and (ii) under credit risk performance real impaired loan to net loan ratio, which is the most important criteria to assess the quality of loans or assets of all the banks has improved increasing the asset/credit performance of the banks.
Keywords: Performance, Profitability, Liquidity, Credit risk, RROA, RROE.
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