Performance of Islamic Commercial Banks in Malaysia: An Empirical Study Yap Voon Choong * Chan Kok Thim ** Bermet Talasbek Kyzy *** Abstract The objective of this paper is to characterize some of indicators of overall bank performance and to decide which, among performance determinants, appears to be the most important and significant. A regression model comprising of dependent variable (ROA or ROE) and numerous independent variables was used to analyze performance of Islamic commercial banks. The empirical results indicated that credit risk is the most significant meaning in performance of local Islamic Commercial Banking in Malaysian. Other contributing factors are liquidity rate and concentration of Islamic commercial Banking. 1. INTRODUCTION Since its emergence in the early 1970s, Islamic banks have steady growth rate in Malaysia. However, recent global financial crisis drew more attention to Islamic banking, shedding doubts on functioning of traditional conventional banking. Since the onset of financial crisis in 2008, global Islamic banking and finance sector has the growth rate, due to increasing demand for its services Islamic banking is gaining popularity in emerging markets after helping some financial institutions avoid the worst of the economic meltdown. Global Islamic Finance industry is experiencing average growth of 15-20% annually 1 . Current global Islamic banking assets and assets under management have reached USD750 billion and it is expected to hit USD1 trillion by 2010 2 and USD1.6 trillion by 2012 3 . * Faculty of Management, Multimedai University, Email: vcyap@mmu.edu.my , Address: Jalan Multimedia, 63100, Cyberjaya, Selangor, Malaysia, Phone No: 03-8312-5659 ** Faculty of Management, Multimedia University, Email: ktchan@mmu.edu.my , Address: Jalan Multimedia, 63100, Cyberjaya, Selangor, Malaysia, Phone No: 03-8312-5661 *** Faculty of Management, Multimedia University 1 Ibid 2 Mckinsey, The World Islamic Banking Competitiveness Report 2007-08, ‘Capturing The Trillion Dollar Opportunity’’ 3 Oliver Wyman Brief, (April 11, 2009), Reuters. http://www.reuters.com/ article/rbssFinancialServicesAndRealEstateNews/idUSL894329009040