The Worldwide Financial Crisis: An Analysis of Financial Performance from the Banking Sector of Pakistan

Abstract

The  global  financial  crisis  (GFC)  of  2007-2008,  which  started  in  the  USA  and  quickly  spread worldwide,  caused  major  disruptions  in  many  countries'  economies.  This  study  focuses  on  evaluating  the financial performance of Pakistan's banking sector before and after the crisis, spanning from 2004 to 2013. Both Islamic  banks  (IBs)  and  conventional  banks  (CBs)  were  analyzed,  looking  at  variables  like  return  on  assets, investments,  solvency,  liquidity,  deposits,  asset  quality,  advances,  and  total  asset  size.  A  stepwise  panel regression model was used for the analysis. The results show that asset quality and advances had a positive effect on return on assets, while solvency, liquidity, investments, deposits, and total asset size had a negative impact.  Comparisons  between  the  pre-crisis  (2004-2008)  and  post-crisis  (2009-2013)  periods  suggest  that  the global financial crisis had an insignificant effect on the financial operations of Pakistan's banking sector.