ijcrb.webs.com INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS COPY RIGHT © 2012 Institute of Interdisciplinary Business Research 186 SEPTEMBER 2012 VOL 4, NO 5 Financial Performance Analysis of Islamic Banks and Conventional Banks in Pakistan: A Comparative Study Saba Sehrish (Corresponding author) Lecturer - Department of Management Sciences, University of Wah The Mall, Quaid Avenue, Wah Cantt (47040) – Pakistan Faiza Saleem Lecturer - Department of Management Sciences, University of Wah The Mall, Quaid Avenue, Wah Cantt (47040) - Pakistan Muhammad Yasir Lecturer - Department of Management Sciences COMSATS Institute of Information Technology Near Officers Colony, Kamra Road, Attock (43600) – Pakistan Farhan Shehzad Independent Researcher – Pakistan Kamran Ahmed Lecturer - Department of Management Sciences, University of Wah The Mall, Quaid Avenue, Wah Cantt (47040) – Pakistan Abstract The aim of this research work is to compare the financial performance of Islamic banking sector and conventional banking sector in Pakistan from year 2007-2011. The Islamic banking in Pakistan is new as compared to the conventional banking. Therefore, to give a clear picture of Islamic banks to the stakeholders, the financial position of Islamic banks has been analyzed and compared with that of well established conventional banks in Pakistan. To measure Performance, six ratios are developed. Financial ratio analysis has been conducted to test the ratios of eight sample banks. The results show that Islamic banks are less risky in terms of dealing in loans and less efficient in expense management as compared to the conventional banks. Whereas, no significant difference has been found in the profitability of both the banking sectors. Overall, Islamic banks’ performance has found satisfactory. Keywords: Islamic Banks, Conventional Banks, Profitability, Efficiency, Credit Risk, Pakistan.