UNIVERSITY UTARA MALAYSIA

ASSIGNMENT 2

THE PERFORMANCE OF CONVENTIONAL AND ISLAMIC BANKING

INSTITUTIONS IN MALAYSIA OVER THE 2014-2019 PERIOD

BWBB2013 BANK MANAGEMENT

GROUP B

PROF. MADYA DR. NORA AZUREEN BT ABDUL RAHMAN

GROUP NAME

NAME NO. MATRIC

1 NURUL SYAFIQAH BINTI MOHD RASHID 262092
2 NURAZIRAH BINTI JAMILUDDIN 262289
3 FARISYA IZZATILYANA BT NASARUDDIN 262787
4 PRASENA A/P IGNATIUS PETER 263455
5 ASHIWHITHA NAIR A/P CHANDREN 273259

INTRODUCTION

HONG KONG AND SHANGHAI BANKING CORPORATION LIMITED (HSBC)

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HSBC's presence in Malaysia dates back to 1884 when the Hongkong and Shanghai Banking
Corporation Limited established its first office in the country, on the island of Penang, with
permission to issue currency notes. In 1959 it bought the Mercantile Bank, which started
operations in Malaysia in 1860. HSBC opened its office in Malacca in 1909 and by the end of
1912, offices had opened in Ipoh, Kuala Lumpur, Johor Bahru and Kota Bharu.During the 1920s
and 1930s, the bank opened more branches in several states - Sungai Petani branch in 1922,
Kuantan in 1929, Muar in 1930, and Kuala Terengganu in 1936.

In Sabah, the first branch opened in Kota Kinabalu in 1947. Branches were set up in Sandakan
and Tawau a year later, followed by Labuan in 1957. In Sarawak, branches opened in Kuching in
1958 and 1964 and in Sibu in 1959. In 2006, HSBC was the first foreign bank to be awarded a
licence to operate a Takaful (Islamic insurance) business in Malaysia. HSBC Amanah Takaful
(Malaysia) Sdn Bhd - a joint venture between HSBC Insurance (Asia-Pacific) Holdings Limited
(49 per cent shareholding), Jerneh Asia Berhad (31 per cent shareholding) and Employees
Provident Fund Board of Malaysia (20 per cent shareholding) - commenced operations in August
2006. In March 2019, HSBC exited the Takaful manufacturing business to focus on its banking
and wealth operations in Malaysia.

In 2007, HSBC Bank Malaysia was the first locally incorporated foreign bank to be awarded an
Islamic banking subsidiary licence in Malaysia, and HSBC Amanah Malaysia Berhad, an Islamic
bank wholly owned by HSBC Bank Malaysia, commenced operations in August 2008. HSBC in
Malaysia has a network of more than 60 branches, of which a third are HSBC Amanah Malaysia
Berhad branches.

AFFIN BANK

The AFFIN Bank Group is a financial services conglomerate. The AFFIN Bank Group’s
activities focus on commercial, Islamic and investment banking services, money broking, asset
management and underwriting of life and general insurance business. Affin Bank Berhad

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(AFFINBANK) provides a suite of financial products and services that is catered to both retail
and corporate customers. The target business segments are categorized under key business units
such as Consumer Banking, SME & Commercial Business Banking, Corporate Banking and
Treasury.

Their tagline of “Banking Without Barriers” signifies the removal of boundaries within the
processes of the Bank as well as its attitude in servicing its customers. The latter means reaching
out to the customers, improving relationships with them, making each one of them feel
privileged and enhancing a new approach to banking and changing the face of conventional
banking. Affin Islamic Bank Berhad (AFFIN ISLAMIC), a wholly owned subsidiary of
AFFINBANKcommenced operations on 1st April 2006 as a full-fledged Islamic bank, and offers
a complete range of Islamic Banking products and services for individuals and corporate which
are in compliance with Shariah principles and laws. As at 31 March 2019, AFFINBANK has a
network of 110 branches in Malaysia.

BANK ISLAM

Bank Islam Malaysia Berhad is the first Shariah-compliant banking institution in Malaysia and
South East Asia, and has been playing the leading role in the development of the nation’s Islamic
banking industry. The Bank has provided technical assistance in the setting up of several Islamic
institutions in the world. Today, Bank Islam champions its role as a value-based intermediary
(VBI). Bank Islam, guided by Shariah-based business principles, is a strong proponent of
growing together with the communities that it serve. VBI is at the heart of their business model,
to deliver a sustainable performance with a strategic focus to support economic, social and
environmental development.

Primarily a retail bank, Bank Islam’s list of offering ranges from traditional financing and
savings product to various solutions exclusively for individual customers, to banking and
financial solutions designed to fulfil the fast-changing financial needs of customers from all

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categories such as investment accounts, wealth management, capital market, trade finance,
project/infrastructure financing, and structured products.

Bank Islam, through its subsidiary, BIMB Invest, has been partnering with UK-based Arabesque
Asset Management Ltd, in introducing ESG-compliant global and local equity funds. The Bank
was also the founding member of IAP Sdn Bhd (Investment Account Platform), an internet-
based multi banks platform that was set up to facilitate channelling of funds from investors to
finance viable ventures. Hence, moving their roles from credit intermediary to investment
intermediary.

Bank has always been committed to corporate social responsibility, not just by giving back to the
community in which it operates, but the Islamic Finance industry as a whole through knowledge
sharing and becoming the source of reference for the industry. Bank Islam continues to offer the
best and cater to differing needs of the customers as its strives to uphold its status as the symbol
of Islamic bank in Malaysia.

BANK MUAMALAT

Bank Muamalat Malaysia Berhad is one of the two independent full-fledged Islamic Financial
Institutions in Malaysia. The bank was established on 1st October 1999 from the combination of
Islamic Banking division’s assets and liabilities of three local banks, namely Bank Bumiputra
Malaysia, Bank of Commerce (Malaysia) and BBMB Kewangan. The shareholders of the bank
comprise of DRB-HICOM which holds 70% shares in the bank with Khazanah Nasional Berhad
holding the remaining shares.Being among the pioneer of Islamic banking, the Bank is strongly
supported by Shariah’s scholars who are highly qualified and experienced in the Islamic
jurisprudence, advising not only in issues pertaining to Shariah products and services but also as
advisor to parties that are planning to raise Islamic Capital Issues or other new innovative
products.

The bank has a nationwide network of 63 branches, a kiosk and an offshore Labuan branch that
provides wide range of Islamic banking products and services including foreign currency

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deposits, investment accounts, foreign exchange trading, working capital financing, trade
financing, project and contract financing, venture capital and Islamic capital market services to
both Malaysians and foreigners.

The Bank is a member of Global Alliance for Banking Values (GABV), an independent network
of banks and banking cooperatives worldwide operating under the “Principles of Sustainable
Banking”. GABV focuses on the returns of real economy and acts as financial intermediary to
support social and environmental impacts. Bank Muamalat Malaysia Berhad is the first Islamic
Bank to be accepted as its member.

ANALYZING THE BANK PERFORMANCE.

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 1. RETURN ON EQUITY ( ROE ) ( HSBC BANK VS BANK ISLAM )

Year HSBC Bank Bank Islam

Net Total Calculation Net Total Calculations
income equity s income equity ( RM )
after taxes capital (RM) after taxes capital
( RM ) ( RM ) ( RM ) ( RM )
2014 964,091 63,976,208 =964,091 127,088 3,498,084 =127,088
63,976,20 3,498,084
8 =0.0363
=0.0151 =3.63%
=1.51%
2015 981,453 7,056,615 =981,453 210,968 3,701,606 =210,968
7,056,615 3,701,606
=0.1390 =0.0569
=13.90% =5.69%
2016 916,856 7,868,213 =916,656 219,371 3,871,931 =219,371
7,868,213 3,871,931
=0.1165 =0.0566
=11.65% =5.66%
2017 855,431 8,379,832 =855,431 245,459 4,072,182 =245,459
8,379,832 4,072,182
=0.1021 =0.0602
=10.21% =6.02%
2018 1,026,185 9,015,208 =1,026,185 278,764 4,296,112 =278,764
9,015,208 4,296,112
=0.1138 =0.0648
=11.38% =6.48%

Return on Equity (ROE) is a measure of financial performance calculated by dividing “net

income after taxes” by “total equity capital”. ROE also consider as return on net assets.

Basically, the bank using ROE to grow the business. The ROE of HSBC Bank on 2014 is 1.51%,

and increasing at higher rate on 2015 by 13.9% and keep decreasing in two year on 2016 and

2017 which are at 11.65% and 10.21% and at the fifth year, 2018, its increase by 11.38%. While

the ROE of Bank Islam on 2014 and 2015 are 3.63% and 5.69%. The ROE decrease on 2015 by

5.66% and keep increasing in two years later on 2017 and 2018 by 6.02% and 6.48%.

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The ROE of HSBC Bank is higher than Bank Islam. So, HSBC Bank is good in generate at

shareholder value than Bank Islam because HSBC Bank is know how to reinvest wisely.

RETURN OF EQUITY ( ROE ) ( AFFIN BANK VS BANK MUAMALAT )

Year Affin Bank Bank Muamalat

Net Total Calculations Net Total Calculations
income equity (RM) income equity ( RM )
after taxes capital after taxes capital
( RM ) ( RM ) ( RM ) ( RM )
2014 476,479 4,730,122 =476,479 154,591 1,741,363 =154,591
4,730,122 1,741,363
=0.1007 =0.0887
=10.07% =8.87%
2015 261,290 4,978,755 =261,290 86,976 1,845,016 =86,976
4,978,755 1,845,016
=0.0524 =0.0471
=5.24% =4.71%
2016 351,316 5,177,972 =351,316 138,617 1,988770 =138,617
5,177,972 1,988,770
=0.0678 =0.0696
=6.78% =6.96%
2017 89,747 1,758,803 =89,747 155,077 2,109,736 =155,077
1,758,803 2,109,736
=0.0510 =0.0735
=5.10% =7.35%
2018 112,442 1,835,877 =112,442 184,250 2,288,698 =184,250
1,835,877 2,288,698
=0.0612 =0.0805
=6.12% =8.05%

The ROE of Affin Bank in year,2014 is 10.07% while in 2015, 2016, 2017 and 2018 are 5.24%,

6.78%, 5.10% and 6.12%. While the ROE of Bank Muamalat in 2014 is 8.87%, 2015 by 4.71%

and keep increasing by three year, 2016, 2017 and 2018 by 6.96%, 7.35% and 8.05%. Based on

this ROE table, in the end of five years, Bank Muamalat have the higher than Affin Bank. So,

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ROE of Bank Muamalat is higher than Affin bank. When the ROE increase by a time (year), that

mean, Bank Muamalat know how to invest because they are good in generate shareholder value.

2. RETURN ON ASSETS ( ROA ) ( HSBC BANK VS BANK ISLAM )

Year HSBC Bank Bank Islam
Net income Total Calculations Net Total Calculations
after taxes assets (RM) income assets ( RM )
( RM ) ( RM ) after taxes ( RM )
( RM )
2014 964,091 70,324,55 =964,091 127,088 4,852,881 =127,088
3 70,324,553 4,852,881
=0.0137 x 100 =0.0261 x 100
=1.37% =2.61%
2015 981,453 75,307,68 =981,453 210,968 5,072,330 =210,968
1 75,307,681 5,072,330
=0.0130 x 100 =0.0415 x 100
=1.30% =4.15%
2016 916,856 72,934,71 =916,856 219,371 5,309,562 =219,371
2 72,934,712 5,309,562
=0.0125 x 100 =0.0413 x 100
=1.25% =4.13%
2017 855,431 67,119,99 =855,431 245,459 5,584,310 =245,459
2 67,119,992 5,584,310
=0.0127 x 100 =0.0439 x 100
=1.27% =4.39%
2018 1,026,135 65,727,43 =1,026,135 278,764 5,405,996 =278,764
5 65,727,435 5,405,996
=0.0156 x 100 =0.0515 x 100
=1.56% =5.15%

Return on Assets (ROA) is a type of return on investment that measure the profitability that

calculated by dividing “net income after taxes” by “total assets”.

In 2014, the ROA of HSBC Bank is 1.37%. While in 2015 is 1.30%. The ROA keep increasing

in three year where at 2016, 2017 and 2018 by 1.25%, 1.27% and 1.56%. Compare to ROA of

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Bank Islam, which are in 2014 and 2015 by 2.61% and 4.15%. The ROA increase in 2016, 2017

and 2018 where at 4.13%, 4.39% and 5.15%.

Which bank is the most capable to make return in institution’s assets into net earning ? Based on

the ROA table’s, Bank Islam is the most capable because the higher the return, the more

productive and efficient management

RETURN ON ASSETS ( ROA ) ( AFFIN BANK VS BANK MUAMALAT )

Year Affin Bank Bank Muamalat

Net Total Calculations Net income Total Calculations
income assets (RM) after taxes assets ( RM )
after taxes ( RM ) ( RM ) ( RM )
( RM )
2014 476,479 48,333,68 =476,479 154,591 20,066,80 =154,591
7 48,333,687 1 20,066,801
=0.0098 x 100 =0.0077 x 100
=0.98% =0.77%
2015 261,290 48,745,24 =261,290 86,976 22,449,88 =86,976
9 48,745,249 6 22,449,886
=0.0053 x 100 =0.0038 x 100
=0.53% =0.38%
2016 351,316 48,075,73 =351,316 138,617 22,649,76 =138,617
5 48,075,735 7 22,649,767
=0.0072 x 100 =0.0061 x 100
=0.72% =0.61%
2017 89,747 20,040,86 =89,747 155,077 23,502,04 =155,077
4 20,040,864 7 23,502,047
= 0.0044 x 100 =0.0065 x 100
=0.44% =0.65%
2018 112,442 25,352,14 =112,442 184,250 23,946,56 =184,250
3 25,352,143 1 23,946,561
=0.0044 x 100 =0.0076 x 100
=0.44% =0.76%

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The ROA of Affin Bank in 2014 is 0.98%. In 2015 by 0.53% and increase in 2016 by 0.72%.

ROA of Affin Bank remain constant in year 2017 and 2018 by 0.44%. While Bank Muamalat’s

ROA in 2014 is 0.77% and then decrease in 2015 at 0.38%. In three year, 2016, 2017 and 2018

its keep increasing by 0.61%, 0.65% and 0.76%.

The higher the return, the more productive and efficient management. From the table above, the

most capable bank is Bank Muamalat because they make a higher return in 2016,2017 and 2018

rather than Affin Bank. The management of Bank Muamalat are productive and efficient.

3. NET OPERATING MARGIN ( AFFIN BANK VS BANK ISLAM)

Yea Affin Bank Bank Islam
r
Pretax Total Calculation Pretax Total Calculation
Net Assets Net Assets
operating (RM) operating (RM)
income income
(RM) (RM)
201 806,854 59,530,70 = 806,854 815,384 53,030,20 = 815,384
4 2 59,530,702 5 53,030,205
= 0.0136 x 100 = 0.0153 x 100
= 1.36% = 1.53%

201 519,262 66,669,67 = 519,262 834,436 57,363,82 = 834,436

5 6 66,669,676 8 57,363,828
= 0.0078 x 100 = 0.0145 x 100
= 0.78% = 1.45%

201 602,758 68,886,34 = 602,758 869,201 63,145,12 = 869,201

6 5 68,886,345 7 63,145,127
= 0.0088 x 100 = 0.0138 x 100
= 0.88% = 1.38%

201 554,070 70,008,79 = 554,070 948,330 65,784,63 = 948,330

7 1 70,008,791 4 65,784,634
= 0.0079 x 100 = 0.0144 x 100
= 0.79% = 1.44%

201 679,109 75,976,47 = 679,109 1,065,45 72,388,54 = 1,065,455

8 2 75,976,472 5 1 72,388,541

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 = 0.0089 x 100 = 0.0147 x 100
= 0.89% = 1.47%

The net operating margin measures how much profit a company makes on a ringgit of sales, after

paying for variable costs of production, such as wages and raw materials, but before paying

interest or tax. It is calculated by dividing a company's “ pretax net operating income” by its

“total assets”. A company’s operating margin, also known as return on sales, is a good indicator

of how well it is being managed and how risky it is.

The net operating margin of Affin Bank in year 2014 is 1.36% while in 2015,2016, 2017 and

2018 are 0.78%, 0.88%, 0.79% and 0.89%. While the net operating margin of Bank Islam in

2014 is 1.53% and keep decreasing by two year, 2015, 2016 by 1.45% and 1.38%. On 2017 and

2018 theres constant increase which is 1.44% and 1.47%.

The higher operating margin is more favorable compared with a lower ratio because this shows

that the company is making enough money from its ongoing operations to pay for its variable

costs as well as its fixed costs. Bank Islam making higher operating margin in

2014,2015,2016,2017 and 2018 rather than Affin Bank. The management of Bank Islam are way

more productive and efficient.

NET OPERATING MARGIN (HSBC BANK VS BANK MUAMALAT )

HSBC BANK BANK MUAMALAT

Year Pretax Net Total Calculation Pretax Net Total Asset Calculation
Operating Assets Operating (RM)
income (RM) income

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 (RM) (RM)
201
4 1 304 836 70 324 1 304 836 205 483 20 061 690 205 483
553 70324553×100 20 061 690 × 100

= 1. 855% = 1.024%

201
5 18 867 2409656 18867 114 324 22 438 036 114 324
2409656 × 100 22 438 036 ×100

=0.783% = 0.510%

201
6 7112 2374986 7112 167 876 22 636 889 167 876
2374986 × 100 22 636 889 ×100

= 0.299% = 0.742%

201
7 17 167 2521771 17 167 171 019 23 526 342 171 019
2521771 × 100 23 526 342 ×100

=0.681% = 0.727%

201
8 19 890 2558124 19890 223 486 23 943 691 223 486
2558124 × 100 23 943 691 ×100

=0.778% = 0.933%

The net operating margin of HSBC Bank in year 2014 is 1.855% while in 2015, 2016, 2017 and
2018 are 0.783%, 0.299%, 0.681% and 0.778%. In year 2014, 2015 and 2016 the net operating
margin decrease and increase in year 2017 and 2018. While the net operating margin of Bank
Muamalat in year 2014 is 1.024% while in 2015, 2016, 2017 and 2018 are 0.510%, 0.742%,
0.727% and 0.933%. The net operating margin of Bank Muamalat in year 2014 until year 2018 is
fluctuated.

The net operating margin is important to measure how much profit HSBC Bank and Bank
Muamalat makes on a ringgit of sales. In year 2014 and 2015 HSBC bank making higher net
operating margin rather than Bank Muamalat and then Bank Muamalat making higher net

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operating margin in year 2016, 2017 and 2018 rather than HSBC bank. Bank Muamalat showed
good performance compared to HSBC bank.

SUGGESTION

 Bank planning include strategy, budget and goals

Both of bank whether conventional banks or Islamic banks should point their own planning.
Banks should set the goals to make sure that they achieve the objective. Different information
about bank or financial institution is measure by the strategy, goals and strategy. Align the
budget with the bank goals by evaluate the strategy to make sure the bank objective had achieve.
Bank goals accounted using budget, larger point of goals it will increase the implication.
Measure the success by seeing and comparing the budget year over year. How about over budget
and how the profit had been generate. The reason bank should had planning also help ensure the
relation with new partner. For instance, both of conventional bank and Islamic bank’ for Affin
Bank and Bank Muamalat ROA were not consistent. ROA is a measure of consistency. Planning
be the main point to get a better consistency and it convey information how well the institution
resources are being used in order to generate income.

 Maximizing the value of the firm

A key objective for any bank is maximize a bank’s stock value. All banks are corporation with
stockholders interested in the value and profit of their stock. If the stock fails to rise in value
appropriate with stockholder expectations, the investors may seek to deliver their shares and the
bank will have difficulty in raising new capital to support its future growth. The value of the
bank’s stock will tend to rise in any of the following situations. The value of the stream of future
stockholder dividends is expected to increase, due perhaps to recent growth in some of the
markets served by the bank or because of profitable acquisitions the bank organization has made.

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The banking organization’s perceived level of risk has fallen, due possibly to an increase in
capital or a decrease in loan losses. Expected dividend increases combined with declining risk, as
perceived by investors in the bank’s stock. For instance, both conventional and Islamic bank
should reducing asset costs, increasing revenues, reducing expenses by organized for the purpose
of maximizing the value of the shareholders’ wealth invested in the firm at an acceptable level of
risk. Performance refers to how adequately a bank meets the objectives of its stockholders
(owners). For instance, for HSBC Bank and Bank Islam show that the amount between these two
financial institution’s ROE might be affected profitable achievements.

 Bank size

The largest banks also generally report the highest noninterest margins because they charge fees
for so many of their services. When the performance of one bank is compared to another, bank
size is usually measured by total assets or total deposits and it become a critical factor. Most of
the bank performance ratios are highly sensitive to the size group in which a bank falls. Then,
many of which reflect the various kinds of risk exposure banks face, the smallest banks usually
report higher ratios of equity capital to assets. Smaller banks appear to be more liquid, as
reflected in their lower ratios of total loans to total deposits, because loans are often among a
bank’s least liquid assets.

BANK CONDITION

 Capital adequacy

Banks must have sufficient capital in order to absorb losses and any potential liquidity declines
stemming from customers withdrawing funds. We can point out that the CAR mean ratio of

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Islamic and conventional banks is between 15% and 27%. These rates are well above the
minimum capitalization required by the Basel agreements. Banks with higher risk tolerances are
potentially at risk for incurring losses, but also may violate regulatory requirements if
insufficient funds are set aside as reserves. The reason banks do not maximize reserves is that
they prefer to use the funds to generate additional revenues. Bank should reduce risk, absorb
losses, public confidence, support the financing and operation of a bank, and provide a protection
to depositors.

 Asset quality

Determining the current and future profitability of the bank. When banks make loans to
households and businesses like, these are considered assets for the banks. A common way to
measure the quality of these assets is by the amount of these loans that are non-performing. Non-
performing loans are loans that are at risk of not being fully repaid, or where interest on the loan
may not be fully paid by the borrower. In this bank, all of it borrowers are repaying their loans
on schedule. So the bank’s non-performing loans are very low.

 Management quality

The management has an overview of a bank’s operations, manages the quality of loans & has to
ensure that the bank is profitable. ROA is primarily an indicator of managerial efficiency. It
indicates how capably the management of the bank has been converting the institution’s assets
into net earnings. Net operating margin, net interest margin and noninterest margin are efficiency
measures as well as profitability measures. For instance, management quality should had even
for conventional or Islamic bank to make sure that net operating margin are efficient and
productive.

 Profitability

The most important indicator of bank performance. The popular ratios: ROA, ROE, and net
interest margin. Malaysian Islamic banks' financing grew by 8.3 per cent in 2019, outpacing
conventional banks' loans growth of 1.6 per cent, bringing the share of Islamic financing to total
system loans to 35 per cent (2015: 27 per cent). “Banks' profitability is likely to face added

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pressure from Bank Negara Malaysia's recent policy rate cut, along with monetary policy easing
in many APAC markets, in addition to existing domestic market competition.

Malaysian Islamic banks' growing contribution to continue: Fitch “Fitch feels that Islamic
financing is likely to grow above conventional loans in the medium term, notwithstanding that
Bank Negara may fall short of its target of 40 per cent Islamic financing mix by 2020. “Islamic
banks' credit profiles should remain broadly steady in the near term, though we see risks to asset
quality and profitability. HSBC Bank is good in generate at shareholder value than Bank Islam
because HSBC Bank is know how to reinvest wisely. Productive and efficient way to make a
profit.

 Liquidity

Liquidity refers to how fast and easy an asset can be converted into cash. To meet deposit
withdrawals and satisfy customer loan demand. If a bank suffers financial distress for any reason,
asset liquidity can be a reserve that the bank can draw on in the event its access to purchased
funds is reduced.

Then, results indicate that conventional banks perform better in profitability, while Islamic banks
perform better in liquidity and credit risk. In t-test of the return on asset (ROA) and total equity
to net loans, there are no major difference between Islamic banks and non-Islamic banks. In the
return on equity and common equity to total assets, there are statistically significant differences
in these two groups. The statistically significant difference was shown in the area of liquidity
which means that the Islamic banks liquidity performance has major difference with the non-
Islamic banks. Return on equity (ROE) helps investors gauge how their investments are
generating income, while return on assets (ROA) helps investors measure how management is
using its assets or resources to generate more income. Both bank should be more sufficient while
using their assets wisely.

CONCLUSION

This assignment looked into the impact of important internal factors on the banking industry’s
profit efficiency in Malaysia with the aim of finding an answer to the question: which banking
system was more profitable during 2014-2019; Islamic or conventional? Independent variables
have been investigated to discover how and how much they correlate with dependent variables

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ROA and ROE, which represent the profitability of banks. The ROE of HSBC Bank is higher
than Bank Islam. So, HSBC Bank is good in generate at shareholder value than Bank Islam
because HSBC Bank is know how to reinvest wisely. ROE of Bank Muamalat is higher than
Affin bank. When the ROE increase by a time (year), that mean, Bank Muamalat know how to
invest because they are good in generate shareholder value. Which bank is the most capable to
make return in institution’s assets into net earning ? Based on the ROA table’s, Bank Islam is the
most capable because the higher the return, the more productive and efficient management. The
higher the return, the more productive and efficient management. From the calculation, the most
capable bank is Bank Muamalat because they make a higher return in 2016,2017 and 2018 rather
than Affin Bank. The management of Bank Muamalat are productive and efficient. The higher
operating margin is more favorable compared with a lower ratio because this shows that the
company is making enough money from its ongoing operations to pay for its variable costs as
well as its fixed costs. Bank Islam making higher operating margin in 2014,2015,2016,2017 and
2018 rather than Affin Bank. The management of Bank Islam are way more productive and
efficient.

Three groups may benefit from the results of this study: banks managers, investors and
government regulators who may utilize the results of this study to enhance their performance and
improve their decision-making. Since the main part of banks’ profits comes from the spread
between the interest earned on loans and the return payable to customer deposits, both internal
factors, volume of loans and volume of deposits, are significantly influenced by banks’
profitability.Therefore, managers and bank administrators, whether Islamic or conventional,
should focus their attention on these two determinants and adopt policies that lead banks to
enhancing their volume of loans and deposits to boost bank profitability.

REFERENCE

1. Business, N. S. T. (2020, March 5). Malaysian Islamic banks' growing contribution to

continue: Fitch. Retrieved from

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 https://www.nst.com.my/business/2020/03/571907/malaysian-islamic-banks-growing-

contribution-continue-fitch

2. Corporate Overview. (n.d.). Retrieved from https://www.muamalat.com.my/corporate-

overview/financials/?y=2019

3. Company Announcements. (n.d.). Retrieved from

https://www.bursamalaysia.com/market_information/announcements/company_announce

ment?

keyword=&cat=AR,ARCO&sub_type=&company=5258&mkt=&alph=&sec=&subsec=&dt_ht=

&dt_lt=

4. Annual Report: HSBC Holdings plc. (2020, March 4). Retrieved from

https://www.hsbc.com/investors/results-and-announcements/annual-report

5. Annual Report: HSBC Holdings plc. (2020, March 4). Retrieved from

https://www.hsbc.com/investors/results-and-announcements/annual-report

APPENDIX

18
HSBC BANK

AFFIN BANK

19
 BANK ISLAM

BANK MUAMALAT

20