Factors affecting the profitability of Islamic banks in GCC countries

• Main Author: Al-Damir, Nasser Ahmed Saeed
• Format: Thesis
• Language: English; English
• Published: 2014
• Subjects: HG Finance
• Online Access: https://etd.uum.edu.my/4888/1/s811069.pdf; https://etd.uum.edu.my/4888/2/s811069_abstract.pdf; https://etd.uum.edu.my/4888/
• Institution: Universiti Utara Malaysia

This study investigates the impact of internal and external factors on Islamic bank’s profitability in GCC countries for a year period from 2006 to 2012. The study used three profitability measures namely, ROA, ROE and NIM. The study used a balanced panel data set of 175 observations of Islamic banks in 5 countries from the GCC. Seven independent variables are used in this study. These are divided into internal variables (size, management efficiency, loan, asset management and capital) and external variables (inflation and GDP). The results of the study indicate that management efficiency, loan, and GDP have positive and significant relationships with ROE. The study also finds that asset management and capital are positive and statistically significant with ROA, ROE and NIM. Inflation has a positive influence on bank’s profitability as measured by ROA and NIM. The study shows that size has a significant negative impact on bank’s profitability. Overall, the study finds that all internal variables and macroeconomic variables tested have significant impacts on bank’s profitability. The findings from this study provide valuable information not only to bank managers, but also to other parties such as government, shareholders, and potential investors with a better guideline and understanding to enhance Islamic bank’s profitability in the GCC