Banks and financial institutions are the heart of the economy of a country.
Though Bangladesh is a developing economy, a significant number of financial
institutions are in operation now in the country. The present study tried to find
out the factors that determine the profitability of Islamic banks in Bangladesh.
For the purpose of the study, five Islamic Banks in Bangladesh have been taken
as the samples. Only the internal factors of banks’ profitability have been taken
into consideration in this study. Profitability has been measured in terms of
Return on Equity (ROE) and Return on Asset (ROA). In model I the findings
indicate that asset management has a significant impact on the profitability of
Islamic banks in Bangladesh. On the other hand, price earnings ratio and bank
size are negatively correlated in terms of Return on equity with the profitability
of Islamic banks in Bangladesh. Capital adequacy ratio and operating efficiency
are positively correlated with the profitability of Islamic banks. On the other
hand in model II it was found that price earnings ratio, operating efficiency and
bank size are negatively correlated with return on equity in terms of profitability
of Islamic banks in Bangladesh. But asset management and capital adequacy
are positively correlated with Return on Equity in terms of profitability of
Islamic banks.
