Conventional and Islamic Banks in Malaysia: Performance Review

The banking industry in Malaysia is regulated by the Central Bank of Malaysia and the government. There are 43 banks listed involved conventional and Islamic banks that have made greatest growth in the industry. Nevertheless, the performance of each banks may be vary depending on their strength. In establishing Malaysia as a global Islamic center, Central Bank of Malaysia has focusing on the growing of Islamic banking. It gave new insights and knowledge to the people about two different practices in the banking industry in Malaysia. Today, Islamic banking has a significant influence to the financial inter-mediation. This entity becomes competence to conventional banks. Hence, these two main streams are provided with the rules and regulations by the Central Bank of Malaysia that needs to be adhered in order to sustain a proper operations and practices. There are numerous factors that affect the performance of banks in Malaysia. The financial ratios have been used to identify the performance of these two main streams. The ratios are ROA, capital adequacy, ROE, asset quality, management adequacy, earnings power, equity multiplier, asset utilization, net loan to total assets, and liquid asset to deposit. Conventional banks in Malaysia are performing better in terms of ROA, ROE, capital adequacy, asset quality, management adequacy, earnings power, and net loan to total assets. Islamic banks are having more values compared with listed conventional banks in Malaysia for equity multiplier, asset utilization and liquid asset to deposit ratio. Overall it can be said that conventional banks are performing better since there are seven ratios out of the ten ratios in Malaysia.