(Thakor, the domestic banks. An observation of

1998) Berger et al. (2006), found a
strong favorable efficiency effects from reforms that reduce the state
ownership of banks in China and increase the role of foreign ownership. The Big
Four National Banks4 are by far the least profit efficient,
apparently due in large part to poor revenue performance and high
nonperforming loans. The majority foreign-owned banks are also relatively
efficient. The
results of the study conducted by Mihir et al. (2009) showed that foreign banks
were slightly
more efficient than the local public and private banks, and that there was not
much of a difference
in the efficiency of public and private banks. Net worth was found to be under-productive
efficient private and foreign banks, while it was properly utilized by public
banks. Thus, profitability of private and foreign banks is
expected to be lower than that of public banks, especially in terms of
return on net worth. Operating expenses were found to be very under-productive
for efficient private and foreign banks.


and Inanoglu (2004) estimated the comparative
cost efficiency of Turkish banks for the period 1990-2000 using the data
envelopment analysis (DEA) method. They found that Islamic banks were more
efficient due to their asset-based financing.

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(2004) compared the performance of Islamic banks and conventional commercial
banks of Bahrain with respect to (a) profitability, (b) liquidity,
and (c) capital management. A comparison of eleven financial ratios
for the period 1991-2001 found no difference in profitability and liquidity
performance between Islamic and conventional banks for that period.

and Majid (2006) investigated the comparative efficiency of foreign and
domestic banks of Malaysia during 2001-2005. They found that
banks’ scale inefficiency dominated pure technical efficiency during
period. They also found that the foreign banks had higher technical efficiency
than the domestic banks.



An observation of Chowdhury (2002)
was that the banking industry of Bangladesh is a combination of nationalized,
private and foreign banks. Many efforts have been made to explain the
performance and efficiency of these banks. For understanding the performance of
the bank requires knowledge about the profitability and relationship between
variables like, market size, bank’s risk and bank’s market size with the


In a study on Malaysian commercial
banks Mohd. Zaini Abdul Karim (2003) found that ICT has significantly increases
the cost efficiency after the legged period of one year. Some other studies on
banking market structure of Malaysia, such as Rostia Suhaimi(2006), Abdul
Ghafar Ismail (2002), found that Malaysia’s banking industry has an imperfect


Van Horne & Wachowicz (2005)
stated that for evaluating a firm’s financial condition and performance a
financial analyst need to perform “checkups” on various aspects of a firm’s
financial health. A tool frequently used these checkup is financial ratio.


Pandey (2006) stated that the
easiest way to evaluate the performance and efficiency of a firm is to compare
its present ratio with the past ratio. It gives an indicator of the direction
of change and reflects whether the firm’s financial performance has improved,
deteriorated or remained constant over time.


Small and medium sized banks from
the early 1970’s until the early 1980’s deregulation occurred were examined by
Wall (1985). He found that profitable banks have lower interest rate and their
non-interest expenses are lower than the less profitable banks. In addition the
more profitable banks have had lower cost of funds, greater use of transaction
deposits, more marketable securities and higher capital.


Gup and Walter (1989) got the consistently
profitable small banks operates basic banking with low cast funds and high
quality investment. The study took under consideration the banks from 1982 to
1987 during the deregulations. During this period there were considerable
differences between regions due to declining energy, real estate and commodity
prices. During this period high quality loan was made by high performance
banks. And these banks held proportionately more capital, invested more in more
securities and relied on lower cost funding sources compared with the average
small bank.


Chowdhury and Islam (2007) pointed
the sensitivity to the interest changes. They narrated that the deposit and
loan advances of nationalized commercial banks (NCBs) are less sensitive to the
interest changes than those of specialized banks (SBs). So, SBs should not make
abrupt change in lending or deposit by following by NCBs. If NCBs changes their
lending rate their deposit or loan and advances will be affected less than
those of SBs.  Moreover, deposits of NCBs
have higher volume and higher volatility than those of SBs. However SBs offer
higher deposit rates and charges higher lending rate than NCBs, which is why
the interest rate spread of SBs was higher than that of NCBs.


Khan (2008) narrated that bank is
evaluated based on profit and loss as the same way for other business. If the
shareholders of the bank more profit than the bank is identified more
successful. Banks can attain success if relevant risks are effectively


Mujeri & Younus (2009) stated
that the higher the higher and non interest income as a ratio of total assets
of banks, the lower the interest rate spread. Similarly market share of a
deposit of a bank, statutory reserve requirement and NSD certificate interest
affects the IRD. The analysis In terms of banks Group Shows that IRS
significantly influenced by operating cost and clasifed loan of stated owned
commercial bank and specialized banks while inflation, operating cost market
share of deposit, statutory reserve requirement and taxes are important for the
private commercial banks. On the other hand non interest income, inflation,
market share and taxes matter for the foreign commercial banks.


Another observation from the
Chowdhury and Ahmed (2009) is that all selected private commercial banks are
able to achieve a stable growth of branches, employee, deposit, loans and
advances, net income, earning per share during the period of 2002-2006. They
pointed that the prospect of private commercial banks in Bangladesh is very


There has been some analysis of bank efficiency in
India. For the most part, these analyses have used financial
indicators for measuring bank efficiency as in the articles by Rammohan and Roy
(2004) and Sarkar
et al. (1998). Rammohan and Roy found that public sector banks are more
efficient than private sector banks in India. In another
study, Kumbhakar and Sarkar (2003) used a cost efficiency approach for
bank efficiency and also concluded that private sector banks had higher levels
of efficiency in contrast to public sector banks in that country.

 Another group of Indian scholars
used the DEA approach in measuring bank efficiency, including Saha and
(2000), Bhattacharyya et al. (1997) and Sanjeev (2006). Bhattacharyya et al.
(1997) determined
that public sector banks were the best performing banks in India during the
late 1980s and early 1990s. Shanmugam and Das (2004)
used a stochastic frontier analysis (SFA) process for measuring technical
efficiencies of Indian commercial banks and found that a group of state banks
were more efficient than a comparable group of
foreign banks during a period from 1992-1999.

Andries and Cocris (2010) analyzed the comparative
efficiency of banks in several southern European countries
during the period of 2000-2006 using both DEA and SFA analytic processes. They
found that banks
in Romania, the Czech Republic, and Hungary all operated at relatively low
levels of technical efficiency. Samad has
done several evaluations of the Bangladesh banking system.

(2009) review of technical efficiency
using data for 2000 found the average efficiency of those banks was 69.6. Samad
(2007) also examined the comparative performance of foreign
banks verses domestic banks in Bangladesh using various
financial ratios of bank performance and found no difference in profit
performance between domestic banks and foreign banks
in the period 2000-2001. In yet another analysis, Samad (2010) estimated
technical efficiency of Grameen bank micro-financing activities in Bangladesh
as developed by Nobel Laureate, Dr. Muhammad Yunus.

(2009) has also previously examined the TE of Bangladesh banking industry, but
the current analysis is
different from the previous studies in several ways. First, there was no
comparison in the previous study. Second, unlike the 2009 study,
this study estimates loan and deposit for technical efficiencies instead of
of the previous study. Samad (2013) investigated the efficiency of Islamic
banks using the time varying Stochastic Frontier
function on the Islamic banks of 16 countries. Mean efficiencies between the
global financial crisis and the post global crisis were estimated at 39 and 38
percent respectively and the difference was not
statistically significant.