Islamic Banking Industry Records 100% Growth in Profit Before Tax

The Islamic banking industry is growing its profits by leaps and bounds which is evident with its handsome profit before tax that saw an increase of a staggering 100 percent in the three quarters of 2019.

According to the State Bank of Pakistan (SBP), the profit before tax in the Islamic banking sector has increased to Rs. 46 billion during the nine-month period of 2019 as compared with the profit before tax of 2018, when it stood at Rs. 23 billion.


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The growth in the Islamic banking is mainly due to the higher financing rates of the banks, increasing inclination of the general masses towards Sharia financing modes, the migration of conventional banks’ customers towards Islamic banks, the ongoing expansion of the banks, and the profitability received from various Sukuk bonds.

The balance sheet of various Islamic banks, including full-fledged banks or Islamic banking windows of conventional banks, showed a remarkable improvement.

For instance, Meezan Bank’s profit grew by over 75 percent year-on-year in the same period. BankIslami bounced back to record 8.8 times higher profit than the previous year. Dubai Islamic Bank also registered a profit of 24 percent during the period.

Islamic banking windows of conventional banks, mainly Habib Bank Limited, United Bank Limited and Bank Alfalah Limited, also showed handsome profitability in the same period.

Islamic banking industry consists of 5 full-fledged banks and 17 Islamic banking windows of different conventional banks.


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Financial Indicators of Islamic Banking Industry

The other indicators of the Islamic banking industry also showed healthy growth. The industry’s Return of Assets stands at 2.1 percent as against 1.4 percent of the overall banking industry. The Return of Equity stands at 33.2 percent as compared to 19.7 percent of the banking industry.

The industry’s overall operating efficiency is also higher. The operating expenses to gross income stand at 52.5 percent compared to 57.4 percent in the overall banking industry.

The assets of the Islamic banking industry increased to Rs. 2.995 trillion by the end of September 2019. Its deposits also surged to Rs. 2.407 trillion by the end of September 2019.

The market share of Islamic banking assets and deposits in the overall banking industry was recorded at 13.8 percent and 16.1 percent, respectively by the end of September, 2019. The share of financing and investments (net) in total assets of the Islamic banking industry stood at 51.6 percent (Rs. 1.5 trillion) and 19.9 percent (Rs. 595 billion), respectively by end of September 2019.