COMPARATIVE STUDIES : IMPACT OF COVID-19 PANDEMIC TOWARDS ISLAMIC BANKING AND CONVENTIONAL BANKING PERFORMANCES

• Main Author: Sofia, Alya
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/68221
• Institution: Institut Teknologi Bandung

The Covid-19 Pandemic has a very big impact not only towards health but also towards the global economy which include the banking sectors which have a major role especially in the economic sectors of a country. This study aims to find the impact of Covid-19 pandemic towards Islamic banking and conventional banking performances also to provides proof whether Islamic banks are more stable than conventional banks in dealing with crises. This study uses the RBRR rating or more known as risk based bank rating which calculates and measure Capital Adequacy Ratio (CAR) (%), Non-Performing Loans (NPL) (%), Net Interest Margin (NIM) (%) and Return of Asset (ROA) (%), and Loan to Deposit Ratio (LDR) (%) method to assess the profitability of the bank, using the Single Index Model to find both the risk and the return of a bank stock, and Granger causality test to find causality between Islamic bank stock return and conventional bank stock return in which will be divided into 2 periods of time which are Pre-Covid 19 (2018) and during Covid-19 (2019-2021). This study is considered as comparative study using secondary data which included the daily stock prices of the banking sub-sectors listed on the stock exchanges of each country. This paper uses 16 samples of banks which are listed in the stock market from 4 different countries that are included in the top 10 leading countries for Sharia- Compliant assets which are UAE, Indonesia, Qatar, and Saudi Arabia. The results of comparing the bank performances and its stock market reaction showed that in general the COVID-19 pandemic did impact the banking sectors with no significant differences in the terms of their banking performances, Islamic Bank has a better average banking performance compared to conventional banks during the crisis of Covid-19 period, Based on the profitability assessment conducted using the risk-based method, which examines the profitability of the bank using the risk assessment profile (Non-Performing Loan and Loan to Deposit Ratio), Earnings analysis (Return on Asset and Net Interest Margin), and Capital Analysis (CAR), it can be concluded that Islamic banks have a better and lower NPL ratio than conventional banks between 2018 and 2021. Islamic banks are also more superior than conventional banks in terms of loan to deposit ratio from 2018 to 2021. Based on the ROA, there is no significant difference between Islamic and conventional banks, with the majority of banks having very healthy criteria. . It can also be seen, during Covid-19, that Islamic banks have a NIM ratio that continues to increase, where conventional banks still have ratios that are not much different before and after Covid- 19. Islamic banks have a greater capital adequacy ratio than conventional banks, however there was no significant change in the CAR ratio in both conventional and Islamic banks during Covid-19. Overall, Islamic banks outperform regular banks in terms of profitability, however there is no difference in profitability performance owing to covid.as for the stock prices for both type of bank generally both Islamic and conventional bank stocks have a very low risk both before and after the pandemic