Comparative analysis of determinants of bank profitability: a case study of Malaysia and Australia

This study conducts a comparative analysis of bank profitability determinants between Malaysia, an upper-middle-income economy with a predominantly Islamic-faith-based banking system, and Australia, a high-income economy with conventional banking. Utilising panel data analysis over a 22-year period from 2000 to 2021, the research examines the trends and factors influencing bank profitability in both countries. Descriptive statistics are also employed to assess the impact of the great financial crisis. The empirical findings reveal similar trends in bank profitability for both Malaysia and Australia, with a notable net increase in return on assets after initial volatility. The results indicate that financial freedom scores did not significantly affect bank profitability in either country, while corruption scores were negative and significant for Australia, and only monetary freedom scores affected Malaysia negatively. Bank-specific variables such as total revenue, bank size, operating expenses, lending ratio, and non-performing loans ratio were significant for Australia, whereas only operating expenses were significant for Malaysia.