tailieunhanh - Measuring the financial performance of Islamic banks

The aim of this paper is to measure the financial performance of two Islamic banks in United Arab Emirates for the period of 2003 to 2007. Different groups of ratios have been used to measure the performance and make a comparison between these two banks. The ratios which are used are going to measure liquidity, profitability, management capacity, capital structure and share performance ratios. The research goes further step to measure the financial stability of the two banks. Descriptive statistical analysis was used to rank the performance, measuring the dispersion and the stability of performance. The finding revealed that the both banks did well for the above period. Moreover, the liquidity level is lower in Dubai Islamic bank than its rival, while the profitability level is much higher in Dubai Islamic bank than in Abu Dhabi bank. Dubai Islamic bank, has managedby and large its operation more successfully than Abu Dhabi Islamic bank, but the later bank is not far off with a similar capital structure. The four ratios of share performance indicted that Abu Dhabi Islamic bank is better off than Dubai Islamic bank. Finally, Abu Dhabi bank had a high level of stability than Dubai Islamic bank. | Journal of Applied Finance Banking vol. 5 no. 3 2015 93-104 ISSN 1792-6580 print version 1792-6599 online Scienpress Ltd 2015 Measuring the Financial Performance of Islamic Banks Mukdad Ibrahim1 Abstract The aim of this paper is to measure the financial performance of two Islamic banks in United Arab Emirates for the period of 2003 to 2007. Different groups of ratios have been used to measure the performance and make a comparison between these two banks. The ratios which are used are going to measure liquidity profitability management capacity capital structure and share performance ratios. The research goes further step to measure the financial stability of the two banks. Descriptive statistical analysis was used to rank the performance measuring the dispersion and the stability of performance. The finding revealed that the both banks did well for the above period. Moreover the liquidity level is lower in Dubai Islamic bank than its rival while the profitability level is much higher in Dubai Islamic bank than in Abu Dhabi bank. Dubai Islamic bank has managedby and large its operation more successfully than Abu Dhabi Islamic bank but the later bank is not far off with a similar capital structure. The four ratios of share performance indicted that Abu Dhabi Islamic bank is better off than Dubai Islamic bank. Finally Abu Dhabi bank had a high level of stability than Dubai Islamic bank. JEL classification numbers E44 G21 M40 Keywords Financial Performance Financial Analysis Islamic Banking United Arab Emirates 1 Introduction A commercial bank s performance is examined for various reasons. Bank regulators identify banks that are experiencing severe problems so that they can remedy them. Shareholders need to determine whether they should buy or sell the stock of various banks. Investment analysts must be able to advise prospective investors on which banks to invest in. Furthermore commercial banks evaluate their own performance over time to determine the outcomes of .