i

THE DETERMINANTS OF FOREIGN ISLAMIC

BANKS PROFITABILITY IN MALAYSIA FROM 2008

TO 2013

SENIA AK SCHWEITZER BETTIE

(2012990595)

BACHELOR OF BUSINESS ADMINISTRATION

(HONS) FINANCE

FACULTY OF BUSINESS ADMINISTRATION

JUNE 2015

ii

DECLARATION OF ORIGINAL WORK

BACHELOR OF BUSINESS ADMINISTRATION

(HONS.) FINANCE

FACULTY OF BUSINESS MANAGEMENT

“DECLARATION OF ORIGINAL WORK”

I, Senia Anak Schweitzer Bettie, (I/C Number: 910521-13-6310)

Hereby, declare that:

This work has not previously been accepted in substance for any degree, locally

or overseas, and is not being concurrently submitted for this degree or any other

degrees.

This project-paper is the result of my independent work and investigation,

except where otherwise stated.

All verbatim extracts have been distinguished by quotation marks and sources of

my information have been specifically acknowledged.

Signature: ______________________ Date: _______________________

iii

LETTER OF SUBMISSION

17th July, 2015

Madam Norzaihan Binti Hashim

Head of Programme,

Bachelor of Business Administration (Hons.) Finance

Universiti Teknologi MARA

Jalan Meranek

94300 Kota Samarahan

Sarawak.

Dear Madam,

SUBMISSION OF FINAL PROJECT PAPER REPORT (FIN 668)

Here, I would like to enclosure the final project paper with the title “The Determinants of

Foreign Islamic Banks Profitability in Malaysia From 2008 to 2013” for your perusal and

consideration.

With the submission of this report, I hope it will meet the requirement as a part to

complete Bachelor Degree in Business Administration (Hons.) Finance.

Thank you.

Yours Sincerely,

SENIA ANAK SCHWEITZER BETTIE

MATRIX NO: 2012990595

iv

ACKNOWDEGEMENT

Firstly, I praising and worshiping of God for allowing me to complete this paper. A lot

of praise for God to spirit me up as well as inspiring me to figure out all problem that I faced

before.

In the first place, I would like to express my deepest sense of sincere gratitude to

both of my advisor, Mr. Ambi Kun and Madam Erimalida Yazi for the valuable assistance

and advises. Moreover, they have never failed to go through my research paper and make

correction as needed. Their excellent patience and guidance have provided me an

excellent atmosphere for doing my dissertation. I am truly appreciated the time and effort

from both of them.

In addition, all thanks to Madam Norzaihan binti Hashim, the Head of Bachelor of

Business Administration programme, for her encouragement and support. To Universiti

Teknologi Mara, fellow lecturers and staffs, thank you for all of the help and knowledge

that I have gained. All of you have really encouraged me towards the completion of this

study.

Last but not least, I would like to express my thankful to my family especially my

parents, Mr. Schweitzer Bettie Anak Tedong and Madam Siti Anak Ungong for motivating

and pushing me. Without their love and support, none of this dissertation would have

been possible.

Sincerely,

Senia Anak Schweitzer Bettie

v

TABLE OF CONTENTS

TITLE PAGES

Acknowledgment .......................................................................................................... iv

Table Of Contents ......................................................................................................... v

List Of Figure ............................................................................................................... viii

List Of Table ................................................................................................................. viii

List Of Equations .......................................................................................................... Viii

List Of Abbreviations ................................................................................................... ix

Abstract ......................................................................................................................... x

CHAPTER .................................................................................................................... 1

INTRODUCTION ........................................................................................................ 1

1.0 Background Of Study ...................................................................................... 2

1.1 Problem Statement ................................................................................. 3

1.2 Research Objective .................................................................................. 4

1.3 Research Question ................................................................................... 4

1.4 Scope Of Study ........................................................................................ 5

1.5 Conclusion ............................................................................................... 5

CHAPTER 2 .......................................................................................................... 6

LITERATURE REVIEW ......................................................................................... 6

2.0 Introduction ............................................................................................. 6

2.1 Review Of Literature ............................................................................... 6

2.2 Foreign Islamic Bank .............................................................................. 7

2.3 Related Literature Review of Return on Asset ........................................ 7

2.4 Related Literature Review of Risk-Weighted Capital Ratio ..................... 8

2.5 Related Literature Review of Overhead Cost ......................................... 9

vi

2.6 Related Literature Review of Gross Domestic Product ...........................10

2.7 Related Literature Review of Inflation Rate ............................................11

2.8 Hypothesis ................................................................................................. 12

2.9 Conclusion ................................................................................................. 13

CHAPTER 3 ............................................................................................................. 14

DATA METHODOLOGY ........................................................................................... 14

3.0 Introduction ................................................................................................. 14

3.1 Theoretical Framework ............................................................................... 15

3.2 Data Description ......................................................................................... 16

3.3 Target Population ........................................................................................ 17

3.4 Data Analysis .............................................................................................. 18

3.5 Model Specification ...................................................................................... 19

3.6 Diagnostic Test ............................................................................................. 20

3.6.1 Coefficient of Determinant (R²) .......................................................... 20

3.6.2 Coefficient Estimate (t-stats) ............................................................... 20

3.6.3 F-statistics ........................................................................................... 21

3.7 Conclusion .................................................................................................... 22

CHAPTER 4 ............................................................................................................... 23

FINDING AND ANALYSIS .......................................................................................... 23

4.0 Introduction .................................................................................................. 23

4.1 Descriptive Statistic ..................................................................................... 24

4.2 Correlation Coefficient Test .......................................................................... 25

4.3 Multiple Regression Analysis ..............................................................;........ 26

4.3.1 Coefficient of Determinant (R²) ......................................................... 27

4.3.2 Coefficient Estimate (t-stats) ............................................................. 27

4.3.3 Hypothesis Testing (F-statistics) ........................................................ 29

vii

4.4 Conclusion .................................................................................................... 30

CHAPTER 5 ................................................................................................................ 31

CONCLUSION AND RECOMMENDATION ................................................................ 31

5.0 Introduction .................................................................................................. 31

5.1 Conclusion ................................................................................................... 31

5.2 Recommendation ....................................................................................... 32

5.3 Limitation Of Study ..................................................................................... 33

REFERENCES .......................................................................................................... 34

APPENDICES ........................................................................................................... 38

viii

List of Figure

Figure 3.1 The Determinants of Foreign Islamic Banks Profitability ............................ 16

List of Tables

Table 3.2 List of licensed banking institutions for Foreign Islamic Banks in

Malaysia .................................................................................................... 18

Table 4.1 Descriptive Statistic of Foreign Islamic Banks............................................... 24

Table 4.2 Correlation Coefficient of Foreign Islamic Banks........................................... 25

Table 4.3 Panel Least Square Method for Foreign Islamic Banks.................................

26

List of Equations

Equation1 Regression Models, taken from Abdel Hamid M. Bashir

(2003) ........................................................................................................ 19

Equation2 Modified equation ....................................................................................... 20

Equation 3 The Relationships between all the variables .............................................. 26

ix

List of Abbreviations

ROA Return On Asset

GDP Gross Domestic Product

RWCR Risk-Weighted Capital Ratio

OHC Overhead Cost

IFR Inflation Rate

BNM Bank Negara Malaysia

x

ABSTRACT

THE DETERMINANTS OF FOREIGN ISLAMIC BANKS PROFITABILITY IN

MALAYSIA FROM 2008 TO 2014

By Senia Anak Schweitzer Bettie

This paper studied the determinants of Foreign Islamic Banks profitability in

Malaysia from 2008 to 2013. The empirical study is conducted to analyze the relationship

between risk-weighted capital ratio, overhead cost, gross domestic product and inflation

rate toward profitability. There are five Foreign Islamic Banks are selected and data were

collected from year 2008 to 2013. The financial ratios technique was applied to calculate

on these variables and Least Square Method was used to run the regression model. We

find that inflation rate, gross domestic product and risk-weighted capital ratio does not

significance to Foreign Islamic Bank profitability.For future studies, it is recommended that

more sample size and determinant factors can be included in determining the effect on

bank profitability.

xi

1

CHAPTER 1 : INTRODUCTION

1.0 BACKGROUD OF STUDY

Islamic banking refers to an arrangement of managing an account that follows

Islamic law otherwise called Shariah law. The underlying principles that oversee Islamic

banking are mutual risk and profit sharing between parties, the assurance of fairness for

all and that transactions are based on an underlying business activity. Islamic banking

has become enormously since it first emerged in the 1970's. There are more than three

hundred Islamic financial institutions worldwide over seventy five countries.

Malaysia's Islamic finance industry has been in presence for more than 30 years.

Today, there are more than a hundred financial institutions was claim to be operating

partially and fully on an interest-free basis in 34 countries. Islamic finance Industry is

assuming an imperative part in today's banking industry. In light of Bank Negara Malaysia

most recent statistics, there have 18 Islamic Banks Institutions and six full-fledged

Foreign Islamic Bank that authorized by Bank Negara Malaysia which are Al-Rajhi

Banking & Investment enterprise (Malaysia) Berhad, Kuwait Finance House (Malaysia)

Berhad, Asian Finance Bank Berhad, HSBC Amanah (Malaysia) Berhad, OCBC Al-Amin

Berhad and Standard Chartered Saadiq Berhad.

Nonetheless, financial turnover has created the majority of the financial institutions

breakdown and most of the banking sectors have been influenced because of the

economy downturn. During these year, there are more investigator began to do their

exploration to focus the components influencing the profitability of Islamic banks in many

countries. The determinants incorporate inside and outside components. Inside elements

of profitability which are within the control of bank management can be extensively

arranged into two classifications financial statements variables and non-financial

statements variables. The illustrations of internal elements are Risk weighted Capital

Ratio and overhead cost. Meanwhile,external elements are those variables that are

2

thought to be outside the ability to control of the management of the bank. The samples of

outside variables are GDP and Inflation Rate. Hassan and Bashir (2003) examined the

impact of controlled and uncontrolled variables on Islamic Bank profitability. They

consider on component, for example, capital, overhead, total national output and

conventional interest rate were decidedly identified with profitability.

Islamic banking in Malaysia was begun in 1983. The World's 100 biggest Islamic

banks have set a yearly resources development rate of 26.7% (BNM, 2011). The greater

part of the conventional banks in Malaysia have included in Islamic Industry also. They

have a subsidiaries bank that running the Islamic shariah idea to work the Islamic item or

financing. There are now five wholesome Islamic banks, local and foreign, and eleven

Islamic subsidiary banks owned by conventional banks, local and foreign.

This study is demonstrated that how the determinant influence profitability and

better seeing about significance of determinants of profitability. There are couple of

studies about Islamic keeping money, they found there are numerous variables impact

the profitability of Islamic bank. Presently the researchers focuses the study into Foreign

Islamic Banks or International Islamic Banks that works in Malaysia as of now.

3

1.1 PROBLEM STATEMENT

Islamic banking industry has been leaps and bounds. This examination is to improve

the performance of Islamic banks distinguishing the pointer by utilizing profit for resources

(ROA) as an estimation to profitability and make sense of what is impacted Islamic Banks

to develop quickly in Malaysia. Worldwide Islamic Banks in Malaysia has a high potential

in Malaysia even the current of the Foreign Islamic Bank is still new in Malaysia (BNM

report).

In light of sources by Bank Negara Malaysia, Foreign Islamic Bank exist in Malaysia

in year 2005. Kuwait Finance House is the first International Islamic Bank that built up by

Bank Negara. It took after by other Foreign Islamic Bank, for example, Al-Rajhi Bank,

Asian Finance House and PT. Bank Syariah Muamalat Indonesia, Tbk. By utilizing the

information of net salary Al-Rajhi Banking & Investment partnership (Malaysia) Berhad,

Kuwait Finance House (Malaysia) Berhad, Asian Finance Bank Berhad, HSBC Amanah

(Malaysia) Berhad, OCBC Al-Amin Berhad and Standard Chartered Saadiq Berhad, we

can see that the International Islamic Bank having great execution is Islamic Banking

industry in Malaysia.

There are numerous researchers examine on the significance of inside (bank

characteristics) and outer (macroeconomic) variables and how the impact the bank's

productivity. Regardless, a substantial part of the studies that is coordinated on the

traditional bank instead of Islamic banks. This has pushed to lead this study on Islamic

Banking Industry especially Foreign Islamic Banks or International Islamic Banks.

4

1.2 RESEARCH OBJECTIVES

General Objective

The objective of this study is to determine the factors affect the profitability of the

International Islamic Banks in Malaysia.

Specific Objectives

The specific objectives of this study comprise:

i. To determine the relationship between internal factor those are Overhead Cost and

Risk- weighted Capital Ratio to Islamic Banking Profitability.

ii. To analyze relationship between external factors those are Inflation Rate and Gross

Domestic Product to Islamic Banking profitability.

iii. To examine the most significant factor that contributes to Islamic Banking Profitability.

1.3 RESEARCH QUESTION

i. What is the relationship between internal factor which are Overhead Cost and Risk

Weighted Capital Ratio to Islamic banking profitability?

ii. What is the relationship between external factor which are Inflation Rate and Gross

Domestic Product to Islamic banking profitability?

iii. What are the factors that are affect the profitability of Islamic banks in Malaysia.

5

1.4 SCOPE OF STUDY

A study has been conducted is research about Foreign Islamic Banks that operates

in Malaysia that consists of Al-Rajhi Banking & Investment corporation (Malaysia) Berhad,

Kuwait Finance House (Malaysia) Berhad, Asian Finance Bank Berhad, HSBC Amanah

(Malaysia) Berhad, OCBC Al-Amin Berhad and Standard Chartered Saadiq Berhad. The

data that have been analyzed is year 2008, 2009, 2010, 2011, 2012 and 2013.

This study focus on the factors that affect the profitability of Foreign Islamic Banks

that operates in Malaysia. The determinants include internal and external factors.

However, for internal determinant, researcher only studied for the financial statement

variables which are overhead cost and risk-weighted capital ratio. Meanwhile, for external

researcher study on how inflation rate and gross domestic product affect Foreign Islamic

Banks profit.

1.5 CONCLUSION

This study is to investigate what os the factors that affects the profitability which is Return

of Asset (ROA) of Foreign Islamic Banks in Malaysia. The interior and outer determinant

of Foreign Islamic Bank's Profitability have been engaged in this paper and the outcome

discovered may vary from past studies as the components utilized may not be the same

and different elements might likewise influence the final result.

6

CHAPTER 2: LITERATURE REVIEW

2.0 INTRODUCTION

This study is to talk about the determinants impact Foreign Islamic Banks to develop

quickly in Malaysia. The study talk about the audit of the past studies about the inside and

outer element that will examine over in this exploration. It’s find the relationship between

the components and profitability being in mind the end goal to propose the applied

system. A theory is in light of the hypothetical will be grow in this setting after audit

2.1 REVIEW OF LITERATURE

These days, Islamic Banking has gets to be critical in the banking industry as

financial analyst understood that Islamic banking was more secure than ordinary saving

money furthermore conveys higher benefit to the organizations.The term of Islamic

Banking refers to a system of banking or banking activity that is consistent with Islamic

law which is shariah principles and guided by Islamic economics. In particular, Islamic law

prohibits Riba, the collection and payments of interest also commonly called Riba in

Islamic discourse. The first Foreign Islamic Bank in Malaysia is Kuwait Finance House

(Malaysia) Berhad that was granted a license under the Islamic Banking Act (Malaysia)

1983 on 8 May 2005. Many researches have been conducted to examine the factors that

affecting the profit of Foreign Islamic Banks.

Banks' benefit has been proposed to focus the bank's execution as benefit reflect

how a bank directed. On the other hand, the components that will focus bank exhibitions

have been partitioned into inner and outside variables that effect the general execution of

Foreign Islamic Banks. Internal factors include risk-weighted capital ratio and overhead

cost. These components are refers to the variables that can be overseen by the

organization of a bank. For the outer components, we have included total national output

7

(GDP) and Inflation Rate where these elements considered outside the ability to control of

a bank's administration which is the macroeconomics variables. The intention is to decide

which among the potential determinants of profitability appears to be important.

2.2 F0REIGN ISLAMIC BANK

Foreign Islamic Bank is also known as International Islamic Bank that defined as Islamic

Bank from other country that expands their business in Malaysia. Its has been licensed by

Bank Negara Malaysia.

2.3 RELATED LITERATURE REVIEW OF RETURN ON ASSET

Return on Asset is utilized to gauge the benefit of the bank. Many regulators believe

that return on asset is the most efficient measurement of bank effectiveness

(Abdel-Hameed M. Bashir, 2003). ROA calculated based on net income divided by total

assets. Generally, the higher the proportion is shows productive usage of benefits of the

firm and better administrative execution while lower proportion implies wasteful utilization

of advantages.

Numerous studies have utilized Return on Asset as needy variable in clarifying

banks' profitability. For occurrences, a research by Akther, Raza, Orangzab and Akram

(2011) and Moin (2008) utilized ROA as a measure of profitability in their investigations of

effectiveness and execution of banks in Pakistan. Alkasim (2005) utilized ROA as the

needy variable as his investigation of benefit of Islamic and Conventional saving money

in the GCC nations. He put an overwhelming emphasis on ROA as it exactly measures

resource execution in the managing an banking industry. Additionally, Bashir and Hassan

(2004) and Ben Naceur (2003) have connected ROA as an execution pointer and as an

8

indigent variable on the grounds that the author accepted that ROA will help to recognize

the adequacy of bank resources. According to Tarawneh (2006), ROA reflects the bank

management ability to generate profits.

2.4 RELATED LITERATURE REVIEW OF RISK-WEIGHTED CAPITAL RATIO

Risk weighted capital ratio or capital adequacy is the ratio which determine the

capacity of the banks in term of meeting the time liabilities and other risks such as credit

risk, operational risk and other external risk. Its measured by bank equity to total assets.

As indicated by Abreu and Mendes (2002), there is a positive relationship of capital

adequacy on bank's profitability. It is an important apparatus for evaluating security and

soundness of banks, a portion of the researchers clarify that when a keep money with

high capital proportion or more value capital is demonstrating the bank is more secure

and it is leverage to get higher benefit that was by and Chan (2009). They likewise

demonstrated that capital will emphatically influence benefit with their examination. This

outcome comparative with Abreu and Mendes (2002) which likewise discovered a

positive relationship between capital and productivity. In their studies, Abreu and Mendes

recommended that an all-around promoted bank confronts lower expected insolvency

expenses and show benefit later.

Indeed, even the majority of the researchers found that are huge positive relationship

between capital proportion and productivity yet a study by Wasiuzzaman and Tarmizi

(2010) and Pramato and Ismail (2006) found that the relationship in the middle of capital

and Islamic banks' profitability is negative in Malaysia. At the point when the estimations

of capital proportion is diminished, it will bring about a lower organization cost and

enhance the firm profit as notice in the study by Wasiuzzaman and Tarmizi (2010).

Hassan and Bashir (2003) additionally discovered the same result which is factually huge

9

negative relationship in the middle of capital and profitability. High capital ratio will reduce

the profitability of the banks.

2.5 RELATED LITERATURE REVIEW OF OVERHEAD COST

In business, overhead cost or overhead expenses refers to an ongoing expenses

that necessary to run a business, but are not attributed to a specific activity. Its also

referred to as “indirect costs”. The example of Operating Expenses such as rental,

electricity, wages and others. The term of overhead is usually used to group expenses

that are necessary to the continued functioning of the business, but cannot be

immediately associated with the products or services being offered do not directly

generate profit. Fixed costs versus variable costs and indirect cost versus direct costs are

closely related to accounting concepts.

Overhead costs are considered as fixed costs. Overhead costs are important to

monitor and control. Since they are not directly related to revenues, they can become a

larger share of the total expenses and burden a firm, soaking up net income and profits.

Typically, an overhead cost is expressed as a percentage of sales or labor cost. Keeping

the proportion of overhead cost low gives a business a competitive advantage, either by

increasing the profit margin or by allowing the business to price its products more

competitively.

Abdul Hamid M. Bashir (2003) found that the higher overhead costs the higher

profit earned by bank. The counter intuitive finding about the association between

performance and overheads suggest that high profits earned by banks may be

appropriated in terms of higher wages and salaries or investment in costly technology

used these banks.

10

2.6 RELATED LITERATURE REVIEW OF GROSS DOMESTIC PRODUCT

As per Francis (n.d.), GDP or financial development is embraced as a control

for repetitive yield impact. It is relied upon to be decidedly in connection with banks'

productivity. The Gross Domestic Product is a fundamental measure of the safety of a

nation's economy in light of the fact that it is a measure of the general monetary yield of

that nation the GDP is basically the business estimation of the merchandise and

administrations that are made inside of the nation amid one year. A study from Abdel

Hamid M. Bashir (2003) additionally found that the higher the GDP of the nation, the

higher banks; productivity. It is considered as an outside determinant of banks' profitability

that was given the positive relationship between the development of the economy and the

prosperity of the managing an account division (Levine and Zevros, 1988)

Numerous researchers have concentrated on the impact of financial development

on banks' benefit. Case in point, a solitary nation thinks about in which getting to the

effect of money related emergency on bank execution in Indonesia by Suffian and

Habibullah (2010). In their studies, they found that there is a positive relationship between

banking sector performance and monetary development. This further study affirm the

discoveries of Pasiouras and Kosmidou (2007) in which the macroeconomic conditions,

for example, monetary development is factually huge and decidedly identified with both

household and remote banks in 15 European nations.

All things considered, another single study on Tunisian managing an account

industry that has been finished by Ben Naceur and Goaied (2006) in which break down

the effect of the money related structure, macroeconomic marker and banks' trademark

on banks' net interest margin and profitability. They have found that the macroeconomic

proxy, for example, GDP have no effect on banks' profitability. Another study done by

Athanas, Delis and Staikouras (2005) in South Eastern European additionally found that

GDP does not show any significance effect on banks' productivity.

11

2.7 RELATED LITERATURE REVIEW OF INFLATION RATE

In economics aspects the inflation rate is a of progress in value level after some

time. The rate of abatement in the buying influence of cash is more or less equivalent.

Inflation rate alludes to a general ascent in costs measured against a standard level of

acquiring force. Costs of merchandise and administrations vary after some time, however

when costs changes an excess of too rapidly, the impacts can stun an economy. The

estimation to gauge inflation rate is Customer Price Index.

The impact of expansion on bank profitability was initially talked about by Revell

(1980). Revell accepted that inflation could be a component in the causation of varieties

in bank's productivity. This theory was experimentally tried by Boyd, Levine and Smith

(2000). The authors utilized different relapse strategies as a part of his studies and found

that there is an in number non straight relationship in the middle of expansion and money

related segment execution. Boyd (2000) conclude that inflation is measurably significant

and adversely identified with the financial sector performance.

Izhar and Asutay (2007) and Haron and Azmi (2004) utilizing the consumer price

index (CPI) as an intermediary for inflation in their studies, both studies found that

inflation had a decidedly association with benefit. In spite of the fact that the first

observational testing on inflation was finished by Bourke (1989), Heggested (1977)

attempted to gauge the impact of inflation on profitability in his study. Heggested utilized

per capital wage as the autonomous variable rather than CPI. Heggested's discoveries,

however, did not demonstrate any relationship between per capital salary and a bank's

productivity.

Ben Naceur (2003) utilized regression analysis (panel data with random effects) to

explore the banks' productivity determinants of the Tunisian managing an account

industry execution. Ben Naceur recommended that development rate are inconsequential

and have no effect on banks' productivity and interest margin.

12

2.8 Hypothesis

Based on the theoretical framework, the hypothesis statement is formulated as follows:

a) H0: There are no significant relationships between inflation rate and Foreign

Islamic Bank profitability.

H1: There are significant relationships between inflation rate and Foreign

Islamic Bank profitability.

b) H0: There are no significant relationships between gross domestic product (GDP)

and Foreign Islamic Bank profitability.

H1: There are significant relationships between gross domestic product (GDP)

and Foreign Islamic Bank profitability

c) H0: There are no significant relationships between Overhead Cost and Foreign

Islamic Bank profitability

H1: There are significant relationships between Overhead Cost and Foreign

Islamic Bank profitability

d) H0: There are no significant relationships between risk-weighted capital ratio

(RWCR) and Foreign Islamic Bank profitability

H1: There are significant relationships between risk-weighted capital ratio (RWCR)

and Foreign Islamic Bank profitability.

13

2.9 CONCLUSION

This chapter provides conceptual background from the previous studies to

strengthen our argument to conduct this study. Gross Domestic Product (GDP) and

Inflation rate as the external factors while risk weighted capital ratio and overhead costs as

the internal factors have included in our context. Data methodology will be discussed in

chapter 3.

14

CHAPTER 3: DATA METHODOLOGY

3.0 INTRODUCTION

In this chapter, we will provide the discussion about the research methodology. We will

discuss about data collection methods, data description, theoretical framework,

hypothesis testing and this research is based on secondary data. The data will collect from

Islamic Banks’ balance sheet and income statement from annual banks report and

Bankscope, International Monetary Fund (IMF) and World Economic Outlook (WEO). Data

were analyzed by using Eview Software.

The purpose of this chapter is to discuss about the research techniques and detailed

methods panned to be used in this study. This chapter is divided into five sections. Section

3.1 is the theoretical framework of the study and discussed about the variables that will be

used in this study. Section 3.2 discusses about the data description. Section 3.3 discusses

about the target population, section 3.4 discusses about the data analysis and Section 3.5

discusses about model specification.

15

3.1 THEORETICAL FRAMEWORK

Theoretical framework is the system on how these variables are connected with one

another. It comprises of dependent and independent variables that are accepted to have

connections towards the examination subject in either a positive or negative way.

Dependent variable is the variable of essential interest to the analyst. Through the

investigation of the dependent variable, it is conceivable to discover answers or solution

for the issues. Independent variables can be characterized as the qualities theorized to

be the input past variable. It is accepted to an impact the dependent variable and is

controlled, measured or chose to gauge the result of dependent variable.

In this paper, Return on Asset (ROA) will be used as an indicator of profitability

estimation. The proportion is characterized as benefit before assessment and Zakat over

aggregate assets. As indicated by Flaimini, Mcdonald and Schumacher (2009), to focus

bank's profitability, ROA is a superior proxy than ROE. It is on the grounds that ROE has

ignored the financial leverage as referred to Wasiuzzaman and Tarmizi (2010).

Independent Variables Dependent Variable Independent Variables

Figure 3.1 The Determinants of Foreign Islamic Banks Profitability

Internal Factors External Factors

Profitability ( Return On Asset )

Risk- Weighted Capital Ratio

Overhead Cost

Gross Domestic

Product

Inflation Rate

16

3.2 DATA DESCRIPTION

The data for this study would be obtained mainly from secondary data. The

procedure for collecting data and attempt to analyze data which have relationship

between dependent variable (Foreign Islamic banks’ profitability) and the independent

variables (inflation, gross domestic product, overhead cost and risk-weighted capital

ratio). The discussion will provide in depth understanding on the relationship of variables.

It will focus on profit of Foreign Islamic Bank that operated in Malaysia.

In this investigation of determinant of profitability of Foreign Islamic banks in

Malaysia, we will incorporate six years information from 2008 until 2013 and utilize the

information from yearly report of 5 International Islamic banks in Malaysia and industry

information from Bank Negara Malaysia to ascertain the proportion, for example, return

on assets, risk weighted capital ratio and overhead cost. In the meantime, we will also

gather total national output (Gross domestic product) and inflation rate information from

World Economic Outlook Database from International Monetary Fund (IMF). All this data

represent dependent and independent variables. This data can be use to examine the

relationship between the independent variables and the profitability of Foreign Islamic

banks in Malaysia. Statistical tools like E-views 7.0 software will be used for data and

analysis.

17

3.3 TARGET POPULATION

The optional information will be utilized as a part of this paper to direct the

exploration on profitability of Foreign Islamic Banks in Malaysia. Along these lines, the

information from 5 Foreign Islamic Banks in Malaysia from 2008 to 2013 will be gotten.

No. Name of the Banks

1. Al-Rajhi Banking & Investment corporation (Malaysia) Berhad

2. Kuwait Finance House (Malaysia) Berhad

3. Asian Finance Bank Berhad

4. OCBC Al-Amin Bank Berhad

5. Standard Chartered Saadiq Berhad

Table 3.2 List of licensed banking institutions for Foreign Islamic Banks in Malaysia

18

3.4 DATA ANALYSIS

The gathered information were analyzed by utilizing Eview software. Eview will be

utilized to examine the information gathered and it gives the outcome on the relationship

in the middle of determinants and benefit of The Determinants of Foreign Islamic Banks

profitability in Malaysia Islamic banks. A panel data method will also be directed to

expand a perception with a specific end goal to perform a more exact and solid

information.

Regression analysis describes the way in which one variable is related to another. It

derives an equation that can be used to estimate the unknown values of one variable on

the basis of the unknown values of another variable. Researcher would use the aid of

software such as Microsoft Excel and Eview to analyze and process the data. It is simplest

method to be used in analyzing raw data which can be used for panel or series data. There

are two types of linear regression analysis which are simple linear regression analysis and

multiple linear regression analysis. In this research, the researcher only uses multiple

linear regressions.

The speculations will be tried in light of the outcome in regression. The critical level

is situated at 0.05, and along these lines, the variable with a probability of t-statistic

beneath 0.05, it is considers to has significant effect on the probability of Foreign Islamic

Banks.

19

3.5 MODEL SPECIFICATION

This is the general linear model for estimation purpose:

Iijt =α0 + αi Bit + βj Xjt + γt Mjt + δj Cj +εijt

Equation 3.1

Where,

Iijt = ROA for bank i in country j at time t

X, M, C = Vectors of different independent variables

Bit = Bank Variables for bank i in country j at time t

α ,β ,γ and δ = Coefficients

εijt = Error term

This equation has been taken from the previous research (Abdel Hamid M. Bashir,

2003) that study on Determinants of Profitability in Islamic Bank in eight Middle Eastern

countries between 1993 and 1998.

Thus, above equation have been modified in this research as follow:

It = α + β1X1 + β2X2+ β3X3 + β4X4 +ε

Equation 3.2

Where,

It = ROA at particular year

α = Regression constant

β1, β2, β3, β4= Coefficient

X1, X2, X3, X4= Determinant (Inflation, GDP, Overhead Cost and RWCR)

εt = Error term

20

3.6 DIAGNOSTIC TEST

After analyst has the regression analysis result by utilizing the EVIEWS

programming, the regression can be investigate based on below determinant:

a) Testing the Coefficient of determination (R²)

b) Test of Significant of Coefficient Estimate (t-stats)

c) F-statistics

3.6.1 Coefficient of Determinant (R²)

The coefficient of determination (R²) is utilized to decide how well the regression line

fits the data. It likewise measures the rate of an adjustment in the independent variable

that can be measured or clarified by the adjustment in the dependent variables. The

estimation of R² extents from 0 to 1. On the off chance that the worth is 0 it demonstrates

that none of the independent variables clarify the adjustments in the dependent variable, if

the quality is 1 it demonstrates that every one of the adjustments in the dependent variable

is clarified by the variety in independent variable utilized as a part of the regression. As a

general guideline, the higher the estimation of R², the higher the logical force of the

assessed estimate equation and the more exact for forecasting purposes.

3.6.2 Coefficient Estimate (t-stats)

The t-stat is utilized to figure out whether there is a huge relationship between the

dependent and every independent variable. . The general guideline for t critical quality is 2.

On the off chance that the ascertained t stat is more significant than critical t value,

independent variable is significant to dependent variable at 95% of significance level.

However if the t-stat is less than critical t values the result is other way around.

21

Computed T- value > Critical T- value, reject Hο

Computed T- value < Critical T- value, accept Ho

3.6.3 F-statistics

The F-statistics is utilized as a part of a multiple regression analysis. F-statistic is

utilized to test the theory that the variety in the independent variable (inflation, GDP,

overhead cost and risk-weighted capital ratio) clarifies a huge variety in the subordinate

variable (Foreign Islamic Bank Profitability). Keeping in mind the end goal to lead the F

test, the computed F values should be contrast and the discriminating estimation of the F

distribution; researchers utilize the F distribution table which utilizes 5% significance level.

As a general guideline for F stats, if F computed value is more than 2, then the overall

independent variables are significant in clarifying the adjustments in the dependent

variable.

Computed F-value > Critical F-value, reject Hο

Computed F-value < Critical F-value, accept Hο

22

3.7 CONCLUSION

Overalls in this chapter are to discuss the method that used in the research and

sample data that collected for analysis. The financial ratio strategy and macroeconomic

information will be embraced to estimate the determinant variables. We have recorded

the 5 Foreign Islamic banks that incorporate in this study. we also have examined the

technique for data analyzed which is multiple linear regression has been used for conduct

the information to give empirical result of our study. The following part will examine about

data examination, for example, propose the result of regression model and discussion on

significant findings.

23

CHAPTER 4: FINDING AND ANALYSIS

4.0 INTRODUCTION

In the previous chapter, we have done for the data collection, model specification and

data processing. In this chapter, we will proceed with the analysis of the results that we

obtained through the multiple linear regressions. This chapter will present the empirical

results and findings by using Eviews software and the interpretations of the outcomes.

Eviews software used to run the data and comparing the outcomes with the significant

confidence level of 90%. The secondary data for both dependent and independent

variables are collected from year 2008 until 2013 from bank’s annual reports and

Bankscope. The annual data for the banks’ consists of five from Foreign Islamic bank. The

data of banks from Bankscope is not completed for each bank. The objective of this paper

is to investigate the determinants of profitability of Foreign Islamic Banks in Malaysia.

24

4.1 DESCRIPTIVE STATISTIC

Roa Rwcr Ohc Gdp Ifr

Mean 0.002393 0.218167 1.310637 -0.005960 0.024500

Median 0.003097 0.168450 0.879950 0.050100 0.019100

Maximum 0.011664 0.920200 4.149700 0.074300 0.054400

Minimum -0.015054 0.110700 0.431000 -1.510000 0.005800

Standard

Deviation 0.005858 0.157680 1.051695 0.285256 0.015695

Skewness -0.926949 3.242340 1.714277 -5.131098 0.130808

Table 4.1 Descriptive Statistic of Foreign Islamic Banks

Table 4.1 above shows the descriptive statistic for risk-weighted capital ratio,

overhead cost, gross domestic product and inflation rate for the year 2008 until 2013. The

table exhibits the value of mean, median, maximum, minimum, standard deviation and

skewness of Foreign Islamic Banks in Malaysia. The overall observation is thirty for every

independent variable. The average of the value of total sample data known as mean. The

highest mean in this model is overhead cost which at 1.310637 and the lowest is GDP at

-0.005980. For median value, the higher value is overhead cost at 0.879950 and the lower

is at ROA which is 0.003097. The standard deviation is measure the dispersion of a

sample from its mean. The highest value of standard deviation is also overhead cost at

1.051695 but the lowest is at Inflation rate. The higher the standard deviation the more

sensitivity the variables. The overall skewness shows the positive value.

25

4.2 CORRELATION COEFFICIENT TEST

Roa

Roa 1

Rwcr -0.143092

Ohc 0.160180

Gdp -0.009578

Ifr 0.003374

Table 4.2 Correlation Coefficient of Foreign Islamic Banks

Table 4.2 shows the results from the correlation coefficient test that has been

conducted. This expresses the degree of correlation in the connection between

explanatory variables. Overall result shows that there is a negative relationship and

positive relationship between variables. RWCR and GDP show the negative relationship

while overhead cost and inflation rate gives positive results. Overhead cost refers to an

ongoing expense that necessary to run a business. The higher overhead costs the higher

profit earned by bank. Hence, this means that every one unit increase in overhead cost

will increase the profitability by 0.141736. Inflation is defined as a rise in the level of prices

of goods and services in an economy, and it could reflect the purchasing power of money.It

indicates higher inflation could bring higher profitability to banks. So that everyone unit of

inflation rate will increase the profitability by 0.003374.

26

4.3 MULTIPLE REGRESION ANALYSIS

ROA = 0.002069 + 0.010637*INFLATION - 0.000527*GDP + 0.000728*OHC -

0.004095*RWCR

Equation 3: The Relationships between all the variables

The equation 3, above shows the relationships between all the variables which are

inflation, GDP, overhead and Risk-Weighted Capital Risk towards return on assets (ROA).

Table 4.3 Panel Least Square Method for Foreign Islamic Banks

Variables Coefficient T-Statistic P- Value

Constant 0.002069 0.650278 0.5214

Rwcr -0.004095 -0.529174 0.6014

ohc 0.000728 0.635160 0.5311

Gdp -0.000527 -0.126031 0.9007

Ifr 0.010637 0.138277 0.8911

F-Statistic 0.240471

Prob (F-Statistic) 0.912701

Coefficient of Determinant (R²) 0.037050

Adjusted (R²) -0.004095

27

4.3.1 Coefficient of Determinant (R²)

The coefficient of determination (R²) is utilized to decide how well the regression line

fits the information. Estimations of R² that are near to 1 infer that the majority of variability

in dependent variable is clarified by the regression model. The estimation of R² for this

regression 0.037050 that shows 3.70% of the changes in the dependent variable that is

explained by the variation in independent variable used in the regression.

4.3.2 Coefficient Estimate (t-stats)

T-test measurement is utilized to test all the hypothesis statements in regards to the

coefficient of individual independent variables. In this exploration the probability are

between 0.5214 until 0.9007. On the other hand, to reject null hypothesis the probability

should not exceeding 0.1 which is at 10% significance level.

Hypothesis 1

H0: There are no significance relationships between inflation rate and International Islamic

Bank profitability.

H1: There are significance relationships between inflation rate and International Islamic

Bank profitability.

The probability for inflation is 0.8911. In this manner, do not reject null hypothesis as

probability for t-test is surpassing 0.1. The outcome also implies that there is positive

relationship between the inflation rate and Foreign Islamic Banks profitability but

insignificant to the significant value.

28

Hypothesis 2

H0: There are no significance relationships between gross domestic product (GDP) and

International Islamic Bank profitability.

H1: There are significance relationships between gross domestic product (GDP) and

International Islamic Bank profitability.

The probability for total national output is 9007 In this way, do not reject the null

hypothesis since the probability for t-test is surpassing 0.1. The outcome additionally

implies that there is positive relationship in the middle of GDP and Foreign Islamic Banks

profitability but insignificant to the significant value.

Hypothesis 3

H0: There are no significance relationships between Overhead Cost and International

Islamic Bank profitability

H1: There are significance relationships between Overhead Cost and International Islamic

Bank profitability.

The probability for Overhead Cost is 0.5311. Along these lines, do not reject the null

hypothesis since the probability for t-test is surpassing 0.1. The outcome also implies that

there is positive relationship between overhead cost and Foreign Islamic Bank profitability

but insignificant to the significant value.

Hypothesis 4

H0: There are no significant relationships between risk-weighted capital ratio (RWCR) and

International Islamic Bank profitability

H1: There are significance relationships between risk-weighted capital ratio (RWCR) and

International Islamic Bank profitability

29

The probability for risk-weighted capital ratio is 0.5214. Along these lines, do not

reject the null hypothesis since the probability for t-test is surpassing 0.1. The outcome

also implies that there is positive relationship between overhead cost and Foreign Islamic

Bank profitability but insignificant to the significant value.;.

4.3.3 Hypothesis Testing (F-statistics)

The F-statistic is utilized as a part of a multiple regression analysis. F-statistics is

utilized to test the hypothesis that the variety in the independent variable (inflation rate,

GDP, overhead cost and risk-weighted capital ratio) clarifies a significant variety in the

dependent variable (Foreign Islamic Bank Profitability).

H0: The dependent variable is not affected by at least one independent variable

H1: The dependent variable is affected by at least one independent variable

Based on the result shows in the table 4.3, the researchers found that the probability

F-stats is 0.912701 which is more than 0.1. The null hypothesis has been accepted

because that the F-statistic is factually not significant at 10% significance level. The results

show that Foreign Islamic Bank profitability not influenced by at least one of the

independent variables.

Since the F-statistic is not significant, it is means that there is no relationship

between the Foreign Islamic Banks profitability with inflation rate, GDP, overhead cost and

RWCR.

30

4.4 CONCLUSION

In chapter 4, we have done on the discussion of empirical results and major findings.

Besides, the discussions of empirical results also include F- statistics, coefficient of

determination and testing of each independent variable. The next chapter will discuss

about the recommendation and conclusion of the study.

31

CHAPTER 5 : CONCLUSION AND RECOMMENDATION

5.0 INTRODUCTION

This chapter contains the conclusion, recommendations and limitation of study. We

discussed conclusion in first part. There are some recommendations and suggestion we

want to provide to the upcoming researchers for future research in second part. The

limitation of study is discussed in the last part.

5.1 CONCLUSION

Bourke (1989) and Molyneux and Thornton (1992) found that inflation had a huge

significant with profit by utilizing CPI as estimation of inflation. Bourke uncovered a

positive relationship between inflation and bank profitability.The researcher found that

there have positive relationships between dependent variable and independent variables.

Be that as it may, the relationship is not significant. If the Inflation rate is high, benefit of

bank additionally high since when inflation purchaser mean to make saving as opposed to

spending. In this manner, it will produce benefit to the bank. In any case, Foreign Islamic

Banks are still new, the investors like to store to other bank that more stable.

In this exploration, researchers found that there has positive relationship between

GDP and Foreign Islamic Bank profitability. This supported by past researcher, Abdel

Hamid M. Bashir who also found that the higher GDP of country, the higher bank

profitability. However, the relationship is not significance at 90% level of confident.

Essentially, profit will be increase when the overhead cost reduced. Then, the

researcher found that there has positive relationship between overhead cost and Foreign

Islamic Banks profit. This result supported via exploration done by Abdel Hamid M. Bashir.

He proposes that high profits earned by banks may be appropriated as far as higher

wages and pay rates or interest in unreasonable innovation utilized by the banks. Foreign

32

Islamic Bank is still new in Malaysia since year 2005 and the bank requires some

investment to increase economic scale in their expenses.

Furthermore, researcher found that RWCR have positive relationship between

Foreign Islamic Bank benefits. This is on the grounds that high RWCR will increase the

confident level among speculator to make venture with Foreign Islamic Bank in Malaysia.

In this way it will gain bank profit.

However F-statistic shows that all the independent variables are not significant to the

dependent variable. Maybe because of constraint data for investigation that need to be

analyzed.

5.2 RECOMMENDATION

This exploration has attempted to examine the relationship between dependent

variable and independents variables. Other than that, the researcher need to figure out

which independents variables is most significant to the Foreign Islamic Banks profitability.

From this study, a few suggestions can be made. Firstly, Foreign Islamic Bank itself needs

to control their overhead cost so it parallel with the benefit for the financial year. Moreover,

the bank itself need to accomplish more advancement so that Malaysian will more

acknowledge and aware for their extraordinary and point of interest of their Islamic item. In

other hands, the bank additionally needs to make development into their item so they can

compete with local Islamic Bank.

33

5.3 LIMITATION OF STUDY

There are some limitations for this study. The time period used in this study only six

years from 2008 until 2013. Foreign Islamic bank are new begin so limited sum of data

existing for research.

Besides, we take secondary data in our study to analyze the profitability of Islamic

banks in Malaysia since it is difficult to be conducted through primary data due to time

constraint and money constraint. For the profitability of Foreign Islamic banks in Malaysia,

we are only able to review secondary data such like articles, journal and financial

statements of the Islamic banks to determine the factors that affect the profitability. When

reviewing the articles, there are a lot of arguments from different authors, some of the

authors might have the different opinion on the variables used to determine the profitability

of Islamic banks. Moreover that, the data were collected from annual report was not

completed and some of data missing.

34

REFERENCES

Abreu, M., and Mendes, V. (2002). Commercial bank interest margins and

profitability: evidence from eu contries. Retrieved 20 April 2015 from

www.iefs.org.uk/Papers/Abreu.pdf

Alkassim, F. A. (2005). The profitability of Islamic and conventional banking in

the GCC countries: A comparative study. Retrieved 26 April 2015 from

http://blog.uny.ac.id/sukirno/files/2011/09/Profitability_Islamic_and-Conventional-Banking

.pdf

Akhter, W., Raza, A., Orangzab & Akram, M. (2011). Efficiency and performance

of Islamic banking: The case of Pakistan. Far East Research Centre, 2(2), 54-70.

Athanasoglous, P. P., Delis, M. D., & Staikouras, C. K. (2006). Determinants of

bank profitability in the south eastern european region. Working Paper 47, Bank of Greece,

1-31.

Bashir, A. M. (2003). Determinants of profitability in Islamic banks: some

evidences from the Middle East. Islamic Economic Studies. 11(1), 31-57.

Bank Negara Malaysia (2015, July). "List of Licensed Banking Institutions in Malaysia."

Retrieved from http://www.bnm.gov.my/index.php?ch=13&cat=banking

35

Ben Naceur, S. (2003). The determinants of the Tunisian banking industry

profitability: Panel evidence. ERF Research Fellow

Ben Naceur, S., & Goaid, M. (2006). The determinants of commercial bank

interest margin and profitability: Evidence from Tunisia”. SSRN Working Paper Series, No:

856365.

Bourke, P. (1989). Concentration and other determinants of bank profitability in

Europe, North America and Australia, Journal of Banking and Finance, 13,

65-79.

Boyd, J. H., Levine, R., & Smith, B. D. (2000). The impact of inflation on

financial sector performance. Journal of Monetary Economics, 47(2), 221-248.

Flamini, V., Mcdonald, C., & Schumacher, L. (2009). The determinants of

commercial bank profitability in Sub-Saharan Africa. IMF Working Paper, 1-30.

Francis, M. E. (n.d.). Determinants of commercial banks' profitability in Sub- Saharan

Africa. Retrieved 12 May 2015 from

http://daadpartnership.htw-berlin.de/fileadmin/Workshops/2011_Uganda/Abstracts_and_

Papers/Munyambonera_Commercial_banks__Profitability_in_SSA.pdf

Hassan, M.K. & Bashir A-H.M. (2003). “Determinants of Islamic Banking profitability”,

Paper presented at the Economic Research Forum (ERF) 10th Annual Conference,

Marrakesh, Morocco.

36

Heggested, A.(1977). Market Structure, risk, and profitability in commercial

banking. Journal of Finance, 32(4), 1207-1216.

Izhar, H., &Asutay, M. (2007). Estimating the profitability of Islamic bank:

Evidence from Bank Mualamat Indonesia. Review of Islamic Economics, 11(2), 17-29.

Levine, R., & Zevros, S. (1998). Stock markets, banks, and economic growth.

American Economic Review, 88(3), 537-558.

Moin, M. S. (2008). Performance of Islamic banking and conventional banking in

Pakistan: A comparative study.

Pasiouras, F., & Kosmidou, K. (2007). Factors influencing the profitability of domestic and

foreign commercial banks in the European Union. Research in International Business and

Finance 21, 222–237.

Pratomo, W.A. and Ismail, A.G. (2006), “Islamic bank performance and capital structure”,

Munich Personal RePEc Archive Paper, No. 6012, posted 29, University Library of Munich,

Germany.

Revell, J.R.S. (1980), “Costs and margins in banking: an international survey”, Paris:

Organization for Economic Co-operation and Development

Sufian, F., &Habibullah, M. S. (2010). “Does economic freedom fosters banks’

performance? Panel evidence from Malaysia”. Journal of Contemporary Accounting &

Economics, doi:10.1016/j.jcae.

37

Vong, A. P. I., & Chan, H. S. (2009). Determinants of bank profitability in Macao.

Macau Monetary Research Bulletin, 12(6), 93-113.

Wasiuzzaman, S. & Tarmizi, H. B. A. (2010). Profitability of Islamic banks in Malaysia: An

38

APPENDICES

List of Foreign Islamic used in this study

No. Name of the Banks

1. Al-Rajhi Banking & Investment corporation (Malaysia) Berhad

2. Kuwait Finance House (Malaysia) Berhad

3. Asian Finance Bank Berhad

4. OCBC Al-Amin Berhad

5. Standard Chartered Saadiq Berhad

Adapted from Bank Negara Malaysia’s official Website

Macroeconomic variables

2008 2009 2010 2011 2012 2013

GDP (%) 4.83% -1.51% 7.43% 5.19% 5.64% 4.73%

CPI (%) 5.44% 0.58% 1.71% 3.20% 1.66% 2.11%

Data from database: World Development Indicators

39

Descriptive Statistic Analysis

Correlation Coefficient Test

40

Multiple Linear Regression ( Least Square Method )

* Significant at the 10% level

Estimation Command:

=========================

LS ROA C INFLATION GDP OHC RWCR

Estimation Equation:

=========================

ROA = C(1) + C(2)*INFLATION + C(3)*GDP + C(4)*OHC + C(5)*RWCR

Substituted Coefficients:

=========================

ROA = 0.002069 + 0.010637*INFLATION - 0.000527*GDP + 0.000728*OHC -

0.004095*RWCR

41

Raw Data of Six Year Foreign Islamic Banks

Asian Finance Bank

Name Year ROA RWCR OHC GDP

AFB 2008 0.00863 0.920200 0.703700 0.048300

AFB 2009 0.001249 0.377600 0.854800 -0.015100

AFB 2010 -0.01505 0.466100 0.665200 0.074300

AFB 2011 -0.00340 0.398900 0.785700 0.051900

AFB 2012 -0.00255 0.257500 0.633900 0.056400

AFB 2013 0.00261 0.227400 0.754100 0.047300

Al Rajhi Bank

Name Year ROA RWCR OHC GDP

ALRAJ 2008 -0.00235 0.131900 1.132700 0.048300

ALRAJ 2009 0.00183 0.213400 1.021500 -0.015100

ALRAJ 2010 0.00415 0.172600 1.040200 0.074300

ALRAJ 2011 0.00506 0.164300 1.330400 0.051900

ALRAJ 2012 0.00198 0.134600 1.240800 0.056400

ALRAJ 2013 0.00047 0.139200 1.335700 0.047300

42

Kuwait Finance House

Name Year ROA RWCR OHC GDP

KFH 2008 0.00461 0.204700 0.431000 0.048300

KFH 2009 -0.00244 0.233400 0.640000 -0.015100

KFH 2010 -0.00893 0.237600 0.766000 0.074300

KFH 2011 -0.00569 0.177900 0.991500 0.051900

KFH 2012 0.00708 0.188900 1.029100 0.056400

KFH 2013 0.01005 0.212000 0.905100 0.047300

OCBC Al-Amin Bank Berhad

Name Year ROA RWCR OHC GDP

OCBC 2008 -0.00047 0.110700 4.138700 0.048300

OCBC 2009 0.003555 0.131200 4.148700 -0.015100

OCBC 2010 0.00554 0.155500 2.850800 0.074300

OCBC 2011 0.00351 0.128600 2.088800 0.051900

OCBC 2012 0.00662 0.146500 2.579800 0.056400

OCBC 2013 0.01062 0.152400 3.442900 0.047300

43

Standard Chartered Saadiq Berhad

Name Year ROA RWCR OHC GDP

SCSB 2008 0.00057 0.133900 0.708500 0.048300

SCBC 2009 0.00269 0.200000 0.773100 -1.510000

SCBC 2010 0.01166 0.144000 0.543500 0.074300

SCBC 2011 0.00721 0.128300 0.559100 0.051900

SCBC 2012 0.00712 0.118500 0.537800 0.056400

SCBC 2013 0.00589 0.137200 0.686000 0.047300