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

Magda Kandil and Markovski Minko ()
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Markovski Minko: Research and Statistics Department, Central Bank of the UAE, Abu Dhabi, United Arab Emirates

Review of Middle East Economics and Finance, 2019, vol. 15, issue 3, 23

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.

Keywords: Islamic banks; conventional banks; United Arab Emirates; oil price fall; banks’ performance; loans; deposits (search for similar items in EconPapers)
JEL-codes: E02 E31 E51 G01 G21 G29 Q43 Q49 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1515/rmeef-2019-0005

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