Table 1 Growth of Islamic banking. PKR in billions All banks Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Dec-13 Total assets 366.3 411.1 477.0 560.5 641.0 8170.8 Investments 72.2 78.0 157.8 231.3 274.3 3054.9 Financing 153.5 157.5 180.4 188.6 200.2 3349.2 Deposits 282.6 329.8 390.1 452.1 521.0 6243.6 YoY change (%) Total assets 17.0 12.2 16.0 17.5 14.4 5.9 Investments 34.9 8.0 102.3 46.6 18.6 16.6 Financing 9.4 2.6 14.5 4.5 6.2 (1.0) Deposits 18.7 16.7 18.3 15.9 15.2 4.7 Source: SBP (Financial Stability Review). Table 1 presents the statistics of progression in Shariah compliant banking. Table 2 Profile of NBFIS. FY 10 FY 11 FY 12 FY 13 Total NBFIS 63 59 56 54 Growth (%) n/a (6.3) (5.1) (3.6) Total assets (PKR Billion) 585.6 470.1 421.9 517.4 Growth (%) n/a (19.7) (10.3) 22.6 Source: SBP (Financial Stability Review). Excluding mutual funds. Table 3 YoY sample distribution. 2005 2006 2007 2008 Islamic banks/Islamic banking units 9 13 NBFIS 50 50 Conventional banks 30 32 Total 89 95 228 13 15 50 50 32 32 2009 2010 2011 2012 2013 20 20 20 20 20 60 62 62 70 32 32 32 32 95 97 102 112 114 114 122 Table 4 Descriptive statistics (2005-2013). Business dynamics Cost efficiency Asset quality Stability Type of Fee based Non-deposit Loans to Overhead Cost income Loan loss Non-performing Liquidity Z score ROA Equity to intermediary income funding deposit costs ratio provisions loans assets Mean Islamic banks 25.58% 45.84% 48.78% 54.24% 86.95% 1.51% 2.68% 42.45% 20.09 1.02% 26.74% NBFIS 67.91% 37.69% 69.79% 39.91% 70.48% 3.78% 3.10% 23.08% 10.00 1.56% 19.79% Conventional banks 31.99% 16.37% 62.22% 37.76% 78.59% 6.89% 11.37% 20.39% 9.25 0.40% 9.23% Median Islamic banks 16.14% 32.05% 54.53% 50.27% 78.84% 0.07% 1.79% 27.15% 11.44 1.19% 19.63% NBFIs 66.41% 32.16% 63.76% 28.63% 57.24% 1.11% 2.50% 11.50% 7.35 1.59% 15.54% Conventional banks 29.18% 13.01% 60.31% 34.91% 59.77% 4.86% 7.59% 17.74% 7.59 0.88% 7.93% Table 5 Fixed effects regression results. Business dynamics Cost efficiency Asset quality Stability Fee based income Non-deposit Loans to funding Overhead Cost Loan loss deposit costs income provisions Non-performing Liquidity loans Z score ROA Equity to assets ratio Islamic bank -0.075 -0.064 0.042 0.047 -0.099 -0.044 -0.095 0.066 6.906 dummy [0.184] 10.159] 10.050] 0.030 [0.122] 10.009]*** [0.020** [0.044] NBFI dummy 0.309 0.153 0.085 0.041 -0.173 -0.024 -0.075 0.006 [1.703]*** -2.702 0.004 [0.006] 0.076 0.017 10.014]*** 0.064 10.1371 [0.016]*** [0.038]** 10.0221 [0.091] 10.007]*** [0.015]*** [0.033] [1.272]** 10.005]** 10.011]*** Nationalized -0.045 0.060 0.005 0.045 0.182 -0.014 0.036 -0.055 banks dummy (0.168] 10.0201*** 3.131 0.0001 0.027 0.046 [0.027] [0.112] 10.009] [0.018]* [0.041] [1.554] [0.006] [0.0131** Crisis year -0.020 0.074 0.046 0.004 0.005 -0.006 -0.003 -0.008 dummy [0.161] 10.0191*** 0.045 -1.935 -0.091 [0.026] [0.107] 0.008] [0.017] [0.039] 10.7991** Log (total assets) -0.064 -0.042 -0.100 0.009 -0.105 0.005 0.001 -0.025 1452 0.009 [0.086] 10.010)*** (0.023)*** (0.014] [0.0571 [0.004] [0.009] [0.021] Non-earning 0.122 -0.501 1.589 0.135 -0.293 0.086 0.001 -0.935 [1.495] -7410 -0.057 assets to total [0.424] 10.0511 [0.117]* [0.022]*** [0.283] 10.022)*** (0.046] [0.102]*** [3.929]* 0.046 10.0011 10.012]*** -0.033 10.003)*** (0.0071*** 10.014)*** (0.002)*** -0.011 assets Non-interest 0.063 -0.189 0.197 earning assets [0.427] 10.0511 [0.118] -0.694 10.069*** (0.285] -0.464 0.071 0.011 -0.030 6.919 10.0231*** (0.047] [0.003]*** [3.957]* -0.018 [0.014] -0.138 10.0331*** to total assets HHI -0.029 -0.615 -0.944 -0.550 -1.530 -0.218 -0.373 -0.248 -1.609 0.025 -0.309 [0.897] 10.1081 10.248)*** (0.146)*** [0.599]** 10.048]*** 10.098)*** [0.218] [8.304] 10.029] GDP Growth -1.354 [2.561] Constant 0.641 0.410 10.309] 0.682 -0.779 1.715 [0.707] 10.4171*** [171]*** -4.878 -0.639 10.137] -1505 10.2821*** 0.388 21.761 0.367 [0.621] [23.698] 0.374 0.885 1.863 0.048 0.255 1.080 15,788 [0.577] 10.069 0.159]** 10.094)*** Adjusted R 0.32 0.528 0.412 0.247 10.3851*** 0.35 10.031] 0.166 10.0631*** 0.147 10.139]*** 0.193 15.3421*** 0.140 10.0851** -0.022 [0.019] 0.41 0.444 10.044)*** 0.483 10.069*** 0.555 10.196]** Table 6 Regressions results (95th quantile). Business dynamics Cost efficiency Asset quality Stability Fee based Non-deposit Loans to Overhead Cost Loan loss income funding deposit costs income provisions Non-Performing Liquidity Loans Z score ROA Equity to assets ratio Islamic bank -0.064 -0.053 0.027 0.026 -0.035 -0.072 -0.092 0.043 7.057 0.002 0.078 dummy 10.0474] [0.189] [0.059) [0.091] 0.068 10.017] 10.042]*** [0.038] 12.2601*** [0.002] 10.0181*** NBFI 0.323 0.727 0.080 0.068 -0.090 -0.047 -0.082 0.003 -3.416 0.074 0.096 dummy 10.0281 [0.119*** [0.019] [0.043] 10.0511 10.006)*** (0.005)*** [0.003] [1.211 10.0271*** 10.006] Nationalized -0.126 0.082 0.007 0.011 0.000 -0.021 -0.051 -0.044 1.322 banks 10.088] (0,033)** [0.022] [0.016] [0.062] [0.016] 10.004)*** [0.043] dummy Crisis year -0.007 0.080 0.013 0.009 0.027 -0.003 -0.002 -0.009 -1.584 dummy 10.008] 10.018)*** [0.071] [0.015] [0.059] [0.002] [0.005] [0.017] 10.3031*** 10.0061** Log -0.023 -0.069 -0.265 0.007 -0.092 0.009 0.007 -0.027 1.177 (total assets) 10.020] 10.014)*** Non-earning 0.144 assets to 10.121] -0.145 10.0381*** 1.442 (0.043)*** (0.010] [0.204)*** (0.088)** 10.0321 0.006] [0.004] [0.033] [2.794] -0.185 -0.118 0.072 0.019 -0.098 -5.044 -0.061 [0.149] 10.011)*** (0.013] [0.012]*** [2.814]* total assets 0.003 [0.349]*** (0.002) -0.014 0.011 10.005)*** 0.039 10.009]* -0.061 10.004)*** 10.0211*** 10.008)*** (0.019)*** -0.071 0.016 Non-interest 0.015 -0.354 -0.308 -0.777 -0.106 0.044 0.010 -0.021 earning [0.011] [0.156]** |-1.657]* (0.3311** [0.337] 10.007]*** (0.013] [0.009]** 8.778 [5.904] -0.016 [0.011] -0.225 10.0191*** assets to total assets HHI -0.034 -0.171 -0.495 -0.420 -1.369 -0.241 -0.313 -0.184 -0.640 0.071 -0.138 10.148] 10.0271*** 10.0581*** GDP growth -1.219 0.375 -0.694 10.0281 1.683 [1.079] [0.822] Constant 0.018 0.323 [1.453] 0.360 0.458 [0.629]** 10.028)*** (0.059]*** -1412 -0.420 -0.536 [0.3271 [0.530]*** [0.1581 1.549 0.172 [0.557] [0.568] [0.071] 10.0181 0.316 23.235 0.260 0.474 [0.078]*** 0.323 [0.259] [16.849] 10.0391 10.1671*** 1.140 10.035] 10.028]*** [0.026]*** [0.113]*** [0.213]*** 10.009] [0.028]*** *** [0.020 6.289 [6.099] -0.002 [0.007] 0.497 10.0381**