After the Great Recession of 2008, Islamic banking and finance emerged as global phenomenon that has drastically changed status quo of international financial architecture. Immense potential of growth and demonstrated stability give sound reason of studying profitability and financial performance of Islamic banks. Study bifurcates its focus into two sections. Firstly, it investigates the determinants of profitability of Islamic banks by segregating variables into internal and external variables and deploys random and fixed effect model to assess the significance of variables in determination model. Study shows that PIB, credit score, liquidity and bank size are positively impacting profitability and Shariah Advisory Board and capital deployed are negatively correlated to profitability among internal variables. While money growth and direct taxes are contributing positively to profitability among external variables. Secondly, it focusses on evaluation of comparative financial performance of Islamic banks and concludes that Islamic banks are more liquid, less volatile and risk and more efficient in contrast with conventional banks. Supervisor:- Dr. Hasan M. Mohsin