The determinants of bank profitability: a study of Islamic banking industry in Bangladesh

This internship report is submitted in a partial fulfillment of the requirements for the degree of Bachelor of Business Administration, 2017.Cataloged from PDF version of internship report.Includes bibliographical references (pages 29-32).The study attempts to identify the factors affecting Islamic banking profitability in Bangladesh, estimates relationship of these factors with bank profitability and suggests recommendations based on the findings to increase profitability. The paper has two main parts. The first part of the report starts with the organization overview of Export Import Bank of Bangladesh Limited where I was enrolled in a three-month period internship program. A brief organization history is positioned at the very first place. Vision and mission statements of the bank and core banking system come next. In addition, the main products of the bank are summarized. The banking products include investment products, deposit products, foreign exchange business and ancillary services. The next section highlights recent five year major financial data and year end share market information of 2016. The first part of the report ends with the description of mainstream Corporate Social Responsibilities carried out through the organization. The second part of the report consists of five chapters of research process. A background of the overall performance of the Bangladesh banking industry is written in the introduction of the research. Three research questions are set in the next place and research objectives are formed based on the questions. Under the scope of the research, list of Islamic banks in Bangladesh, selected Islamic banks for the research and time range of data are mentioned. The first chapter concludes with the limitations and significance of the study. In the second chapter, around twenty literatures are reviewed related to the bank profitability. Based on the literature review, in the third chapter of the study, the endogenous and exogenous variables are chosen, seven hypotheses and three different model equations are formed. The study takes return on assets, return on equity and net investment margin as the measure of profitability. Besides, bank size, capital to risk assets ratio, investment to deposit ratio, percentage of non-performing investment and cost to income ratio are taken as the company specific exogenous factors. Economic growth and inflation are also considered as macro-economic independent determinants. Fixed effect or random effect models are used to run all three equations. The appropriate model for each equation is chosen based on Hausman Test. In the fourth chapter, data analysis and findings are presented. Investment to deposit ratio is found to be positively correlated and cost to income ratio is observed to be negatively correlated to profitability in all the three models. Based on the findings, the conclusions and recommendations are given in the last chapter of the study.S. M. Rifat HassanB. Business Administratio