UAE Banks’ Performance and the Oil Price Shock: Evidence across Conventional and Islamic Banks

2019 ◽  
Vol 15 (3) ◽  
Author(s):  
Magda Elsayed Kandil ◽  
Minko Markovski
Keyword(s):  
Negative Impact ◽  
Oil Price ◽  
Islamic Banks ◽  
Fiscal Consolidation ◽  
Return On Assets ◽  
Return On Equity ◽  
Oil Price Shock ◽  
The Difference ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

Abstract This study attempts to identify whether the oil price fall to a “new normal” in mid-September 2014 has had an impact on banks’ performance in the UAE, such as Return on Assets (ROA) and Return on Equity (ROE) in addition to credit and deposit growth. The sample is for a sample of 22 national banks in the country over a period of 15 quarters. The oil price fall has had a negative impact on all four banking indicators. In addition, the analysis evaluates the difference in ROA, ROE and credit and deposit growth by bank type, conventional vs. Islamic banks, across the sample of 22 banks. The results indicate that Islamic banks have a higher lending and deposit growth rates, however conventional banks tend to have better indicators of performance. Further, the oil price fall has impacted banks’ performance adversely, and the growth of assets and liabilities as a result of the slowdown in economic activity, fiscal consolidation, and decreasing levels of employment and corporate profitability. Further, Islamic banks, judged by lending and deposit growth, have managed to tailor their products to cater to a growing demand. However growth objectives appear to have reduced the margins of return in Islamic banks, compared to conventional banks.

scholarly journals Impact of COVID-19 on the Performance and Stability of Conventional and Islamic Banks in the GCC Region, Malaysia, and Pakistan

2021 ◽  
Vol 8 (1) ◽  
pp. 25-37
Author(s):  
Qazi Yasir Arafat ◽  
Abdul Rashid ◽  
Qazi Waseem Jan
Keyword(s):  
Negative Impact ◽  
Islamic Banks ◽  
Return On Assets ◽  
Return On Equity ◽  
Quarterly Data ◽  
Z Scores ◽  
Conventional Banks ◽  
The Stability ◽  
The Impact ◽  
Conventional And Islamic Banks

This study examines the impact of COVID-19 on the performance and stability of conventional and Islamic banks. The sample included all the 21 listed Islamic banks (IBs) and 44 listed conventional banks (CBs) from the GCC region, Malaysia, and Pakistan. Quarterly data of these banks covering the period January 2019 to June 2020 were obtained from their quarterly reports. Performance was measured by return on assets (ROA) and return on equity (ROE), while stability was measured by the Z-scores of these banks. Based on the previous literature, a better performance of IBs was expected because these banks are based on the participatory mode of financing instead of debt-based financing. However, the results of the current study showed a significant and negative impact of COVID-19 on the financial performance of both types of banks, suggesting that either type of banking was significantly affected during the pandemic. However, we did not find any significant evidence of the impact of COVID-19 on the stability of these banks.

scholarly journals Do Oil Price Shocks and Other Factors Create Bigger Impacts on Islamic Banks than Conventional Banks?

Energies ◽  
2020 ◽  
Vol 13 (12) ◽  
pp. 3106
Author(s):  
Jabir Esmaeil ◽  
Husam Rjoub ◽  
Wing-Keung Wong
Keyword(s):  
Oil Price ◽  
Oil Price Shocks ◽  
Islamic Banks ◽  
Price Shocks ◽  
Gcc Countries ◽  
Long Run ◽  
Oil Price Shock ◽  
Price Shock ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

The main aim of this study is to empirically examine and compares the impacts of oil price shocks, Arab revolutions, some macroeconomics, and bank-specific variables on bank profitability indicators between Conventional and Islamic banks in Gulf Cooperation Council (GCC) countries. The study employed panel Autoregressive-Distributed Lag (ARDL) techniques to examine the causal relationship both at the short and long-run. Our results reveal that most of the variables employed in our study significantly influence Return on Asset (ROA), Return on Equity (ROE), and Net Interest Margin (NIM)/ Net Profit Margin (NPM) for both Conventional Banks (CBs) and Islamic Banks (IBs) similarly in the long run. Findings from our study imply that both CBs and IBs have some similar features in nature, which could be because of the structure of the policies for IBs is in line with the regulatory framework for the CBs. The main finding from the study is the significance of oil price shock and the Arab springs that are more pronounced in CBs than IBs. Also, it can be seen that a sustainable profit of IBs is higher than CBs due to the adjustment speed of IBs to equilibrium in the presence of shock is found to be higher than CBs. Hence, our study suggests that oil price shock could be utilized for having a prudent macro regulation for the banks in GCC countries. Our findings are useful to Government officers, bankers, investors, and researchers for their decision making by estimating future trends of the profitability for both Conventional and Islamic banks in the GCC countries.

scholarly journals Financial Performance of Banks in Lebanon: Conventional vs Islamic

2019 ◽  
Vol 12 (2) ◽  
pp. 40 ◽  
Author(s):  
Boutheina HASHEM ◽  
Hiyam SUJUD
Keyword(s):  
Regression Analysis ◽  
Financial Performance ◽  
Banking Industry ◽  
Bank Performance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Return On Assets ◽  
Return On Equity ◽  
The Difference ◽  
Conventional Banks

This study compares the performance of Islamic and conventional banking in Lebanon in terms of Return on Assets and Return on Equity over the period 2012-2016. Moreover, it examines whether the internal characteristics of the bank may explain the difference in profitability between two types of banking transactions. In addition, the results of the study are analyzed using a regression analysis applied to a sample of both Islamic and conventional banks to investigate the effects of these variables on bank performance. Furthermore, results show that Islamic banks in Lebanon have better asset adequacy compared to conventional banks. However, conventional banks are better in liquidity and are on an average more profitable than Islamic ones. It is worthy to indicate that the Islamic banking industry in Lebanon is still in its infancy and only very few of the banks were active in this sector.

scholarly journals How Efficient is the Islamic Banking Model in Pakistan?

2017 ◽  
Vol 6 (1) ◽  
pp. 111-125
Author(s):  
Tahseen Mohsan Khan ◽  
Mohsan Khan Rizwan ◽  
Saima Akhtar ◽  
Syed Waqar Azeem Naqvi
Keyword(s):  
Credit Risk ◽  
Asset Management ◽  
Capital Adequacy ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Return On Assets ◽  
Management Capability ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

The purpose of this study is to analyze the conventional and Islamic banking in Pakistan. For this study, a sample of 19 conventional banks and five Islamic banks was selected. The CAMEL approach is used to evaluate the performance of both conventional and Islamic banks. Ten ratios were used to measure profitability, liquidity and credit risk. Our findings suggest that Islamic banks are less efficient than conventional banks in asset management, management capability and liquidity. Conventional banks have better earning capability in terms of return on assets and overhead ratios. The analysis also shows that Islamic banks have better capital adequacy than conventional banks.

scholarly journals PERBANDINGAN TINGKAT PROFITABILITAS DAN LIKUIDITAS DARI ASSET-LIABILITIES MANAGEMENT PADA BANK SYARIAH DAN BANK KONVENSIONAL

2016 ◽  
Vol 5 (1) ◽  
pp. 1
Author(s):  
Rindang Nuri Isnaini Nugrohowati
Keyword(s):  
Banking Sector ◽  
Banking System ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Return On Assets ◽  
Return On Equity ◽  
Liability Management ◽  
Capital Adequacy Ratio ◽  
Conventional Banks ◽  
Important Position

Abstract The banking sector has a very important position for the economic systemof a country. The banking system, which is part of the financial system willaffect the course of the economic system as a whole. If the banking system isweak then the system will also be weak economy. Banking is an intermediaryinstitution is the institution that channel funds from surplus funds (surplusunits) to the sectors that lack of funds (defi cit units). With the banking economic actors in need of funds can be met so that the economy can continue to run. In this study will specifi cally analyze the comparison of the level of profi tability of the asset-liability management in Islamic banks and conventional banks are seen from the return on assets and return on equity rises. It also will be studied comparative level of liquidity in Islamic banks and conventional banks are seen from the loan to deposit ratio and Capital Adequacy Ratio. By Hyphothesis is as follows : Ha1: there are differences in the level of profitability of the asset-liabilitymanagement in Islamic banks and conventional banks are seen from the return on assets and return on equity Ha2: there are differences in the level of liquidity in Islamic banks andconventional banks are seen from the loan to deposit ratio and Capital Adequacy Ratio Data analysis has been done obtained the following conclusions, based onmeans testing compare with test Independent-Samples t-test showed that the level of tability seen from ROA and ROE between Islamic Bank and Bank Konvensiona show any signifi cant difference. This is demonstrated by tests of signifi cance 0.02 0.05 for FDR, while for the signifi cance test CAR of 0.38> 0.05. Keyword: Profi tabilitas, Likuiditas, Asset Liabilities Management, Bank Syariah

scholarly journals Liquidity Risk Management: A Comparative Study between Conventional and Islamic Banks in Bangladesh

2016 ◽  
Vol 10 (2) ◽  
pp. 18-35 ◽  
Author(s):  
Md Lutfor Rahman ◽  
SM Hasanul Banna
Keyword(s):  
Risk Management ◽  
Liquidity Risk ◽  
Equity Capital ◽  
Capital Adequacy ◽  
Annual Reports ◽  
Islamic Banks ◽  
Working Capital ◽  
Return On Assets ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

Liquidity risk may arise from diverse operations of financial intermediaries, facilitators and supporters as they are fully liable to make available liquidity when required by the third party. Incase of Islamic Banks additional efforts are required for scaling liquidity management due to their unique characteristics and conformity with Shariah principles. The objective of this study is to look into the liquidity risk associated with the solvency of the financial institutions, with a purpose to evaluate liquidity risk management (LRM) through a comparative analysis between conventional and Islamic banks of Bangladesh. This paper investigates the significance of Size of the Firm, Net Working Capital, Return on Equity, Capital Adequacy and Return on Assets (ROA), on Liquidity Risk Management in conventional and Islamic banks in Bangladesh. The study has taken six mid-size banks- three conventional and three Islamic banks as samples. It is based on secondary data which are collected from the selected banks’ annual reports, covering a period of 2007-2011. Independent variables that have positive but insignificant relation are; size of the bank and net working capital to liquidity risk in Islamic banks and in case of conventional banks size of bank is negatively related with the liquidity risk. Only return on assets is positively affecting the liquidity risk at 10% level in case of conventional banks, but in Islamic banks the relationship is insignificant. The other variables are found to be insignificant in affecting the liquidity risk for both the conventional and Islamic banks in BangladeshJournal of Business and Technology (Dhaka) Vol.10(2) 2015; 18-35

scholarly journals Conducting Business with God: Is God Blessing Islamic Banks with Better Financial Performance than Conventional Banks?

2019 ◽  
Vol 6 (2) ◽  
pp. 40
Author(s):  
Musaed S. Alali
Keyword(s):  
Financial Performance ◽  
Financial Analysis ◽  
Stock Exchange ◽  
The Other ◽  
Islamic Banks ◽  
Return On Assets ◽  
Return On Equity ◽  
Significant Difference ◽  
Kuwait Stock Exchange ◽  
Conventional Banks

This study aims to compare the financial performance between Islamic and conventional banks listed at Kuwait stock exchange over the period 2011-2018 using the modified DuPont model of financial analysis which is based on the analysis of return on equity (ROE). Unlike previous studies where researchers compared the performance on a bank-to-bank basis, this study examines the aggregate ratios of Islamic banks and compare it to aggregate ratios of conventional banks. The study also adds volatility into the model since consistency in returns indicated a more stable sector.  Results obtained from this study showed that conventional banks in Kuwait had a better mean performance during the study period in terms of both return on assets (ROA) and return in equity (ROE), Islamic banks also showed a higher deviation in these two ratios resulting in a lower Sharpe ratio. While the results showed no statistically significant mean difference between Islamic and conventional banks in terms of return on assets (ROA), the results also showed a statistically significant difference in mean return on equity (ROE) between the two sub-sectors.  On the other hand, Islamic banks showed an impressive improvement in their ratios during the last three years of the study period which impose a real threat to conventional banks in the future.

scholarly journals Financial Performance of Islamic and Conventional Banks in Malaysia: A Comparative Analysis

2019 ◽  
Vol 6 (4) ◽  
pp. 375-385
Author(s):  
Yasin Ahmed Sulub ◽  
Marhanum Che Mohd Salleh
Keyword(s):  
Financial Performance ◽  
T Test ◽  
P Value ◽  
Debt Ratio ◽  
Financial Industry ◽  
Return On Assets ◽  
Return On Equity ◽  
Business Operations ◽  
The Difference ◽  
Conventional Banks

This paper analyses the financial performance of Islamic (IB) and conventional banks (CB) in Malaysia comparatively, within the scope of a dual setting arrangement in the Malaysian financial industry. Performance evaluation of both types of banks relies on ratio analyses which include Return on Equity (ROE), Return on Assets (ROA), Earnings per Share (EPS) and Debt Ratio. Data for this study covers four full-fledged IBs and four CBs in the period between 2012 and 2016. Based on statistical analysis (t-test and correlation analysis), the average of ROE was 6% for IBs and 14% for CBs. Results of t-test reveals that this higher performance of CBs is significant (t-test=1.957, p-value= 0.029). Furthermore, both ROA and EPS were significantly different between the two groups at p-value less than 1%. These results indicate that the Malaysian CBs performed better than IBs, at least for the banks included in this study. In terms of debt ratio, (the percentage of liabilities to total assets), IBs carry more debts than CBs. The risk of this higher debt is that the bank may be at risk of bankruptcy and may not be able to pay its obligations on time. The difference between the average debt of the two groups is significant at less than 5% (t-test= -2.251, p-value= 0.015). Therefore, not only is IBs’ performance inferior to CBs but their debt ratio is also higher. This research has implications for IBs; they should further improve their performance to become more competitive in the current environment for the financial industry. More importantly, IBs need to uphold Islamic ethics throughout their business operations to ensure that both the stated principles and subsequent objectives are achieved.

scholarly journals Life after Debt: The Effects of Overleveraging on Conventional and Islamic Banks

2020 ◽  
Vol 13 (6) ◽  
pp. 137
Author(s):  
Samar Issa
Keyword(s):  
Global Financial Crisis ◽  
The United States ◽  
The Other ◽  
Islamic Banks ◽  
Global Crisis ◽  
The United Kingdom ◽  
The Difference ◽  
Conventional Banks ◽  
The One ◽  
Conventional And Islamic Banks

It is generally argued that Islamic banks are safer than conventional banks. The prime reason is that their product structure is essentially asset-backed financing, while conventional banks rely heavily on leveraging, which was considered one of the main causes of the 2008 global financial crisis. This paper examines the riskiness of Islamic and conventional banks during the 2008 global crisis by measuring overleveraging, defined as the difference between actual and optimal debt. This research conducted empirical analysis on the overleveraging of 20 banks (10 conventional and 10 Islamic banks) from five different countries, namely, Bahrain, Kuwait, Malaysia, the United States, and the United Kingdom. The analysis is double-folded: on the one hand, the results in this paper suggest that excess debt, rather than the mere holding of debt, was the reason behind the severe financial meltdown in 2007–2009; on the other hand, this paper shows that Islamic banks, in most of the countries in context, performed better during the recent crisis, but were subject to the second-round effect of the global crisis around the years of 2011–2013.

scholarly journals Continued discussion on conventional versus Islamic banks: combining financial ratios and efficiency

2020 ◽  
Vol 15 (1) ◽  
pp. 132-142 ◽  
Author(s):  
Mohammad Imdadul Haque ◽  
Mohammad Rumzi Tausif ◽  
Anis Ali
Keyword(s):  
Financial Ratios ◽  
Data Envelopment ◽  
Policy Recommendations ◽  
Islamic Banks ◽  
Net Income ◽  
Return On Assets ◽  
Return On Equity ◽  
Using Data ◽  
Conventional Banks ◽  
Better Than

Two different types of banking systems, Islamic and conventional, dominate the banking structure in Saudi Arabia. The purpose of this paper is to contribute to the ongoing debate as to which of the two is better. Using data for the period 2014–2018, the study compares Islamic and conventional banks. It combines traditional financial ratios, Return on Assets (ROA) and Return on Equity (ROE), with Data Envelopment Analysis (DEA) to perform a comprehensive analysis. In terms of ROA, the performance of conventional banks is better than that of Islamic banks, but in terms of ROE, vice versa. DEA results show that conventional banks are more efficient than Islamic banks. In fact, in terms of ROA and ROE, Al Rajhi Bank, an Islamic bank, is the best performer. But in terms of efficiency scores from DEA, Al Rajhi ranks seventh among all banks, while NCB, a conventional bank, ranks first. Issuing shares and utilizing funds in profitable options, such as loans and advances to increase net income, are the policy recommendations for Islamic banks to further improve. In addition, as the study finds no correlation between the ratio and efficiency scores, it proposes to use a combined measure of ratio analysis and efficiency analysis for a comprehensive assessment of bank performance.

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