ijcrb.webs.com INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS COPY RIGHT © 2012 Institute of Interdisciplinary Business Research 86 MARCH 2012 VOL 3, NO 11 Determinants of profitability of Islamic banks, A case study of Pakistan Syed Atif Ali Lecturer Lahore Business School, the University of Lahore Azam Shafique Asst. Professor Hailey College of Commerce, The University of Punjab Amir Razi Lecturer Lahore Business School, the University of Lahore Umair Aslam Lahore Business School, the University of Lahore Abstract This research paper focus on Determinants of profitability of Islamic banks. It includes literature review on determinants. Hypothesis are tested and discussion is done on basis of data. Different tests are applied to draw conslusions at the end. Keywords: Determinants ; Profitability ; Islamic banks; Case study ; Pakistan I. Introduction The banking sector is well thought-out to be an important source of financing for most businesses. The common assumption, which underpins much of the financial performance research and discussion, is that increasing financial performance will lead to improved functions and actions of the Organizations. The subject of financial concert and research into its measurement is well advanced within finance and management fields. It can be argued that there are three principal factors to improve financial performance for financial institutions; the institution size, its asset management, and last one the operational efficiency. Since the first institution was established in 1963, Islamic banks have gained a foothold in almost every majority Muslim country and in a few non-Muslim countries. Not only do Islamic banks provide Profit-sharing (instead of pre-determined interest payments) banking conveniences, but they are also expected to undertake business and trade activities on the basis of fair and legal profits. In such banks, ensuring fair practices in dealings with customers and shareholders takes centre stage, more so than in conventional banking where much fair practice needs to be