AIBC 2024: 5th Applied International Business Conference 2024

This study investigates the determinants of the net profit margins (NPM) of foreign Islamic banks in Malaysia covering from 2008-2022. Using the fixed effect estimator technique, we find positive and significant effects of risk aversion, overhead cost, total assets, gross domestic product growth and market share loan with foreign Islamic banks' NPM. The empirical findings indicate that higher total weighted risks, capital adequacy ratio, total loan and inflation decrease the NPM of foreign Islamic banks. Therefore, the analysis clearly shows that both the internal and external factors of the foreign Islamic banks have a statistically significant effect on NPM. The findings provide guidance for Islamic banks, policymakers, and regulators in designing strategies to improve the NPM of foreign Islamic banks in Malaysia.