Determinant Factors of Islamic and Conventional Banks Performance in the GCC Countries

초록

The objective of this paper is to verify whether the differences between Islamic banks and commercial banks shown in previous research remain the same in terms of profitability, and to examine how the factors determining probability are different for both. To fulfill the purpose stated above, 33 Islamic banks and 47 commercial banks in six GCC countries have been examined to analyze differences in profitability and factors determining probability using the random effect model from 1996 to 2007. As a result, the ROA and NIM, which are used as proxies for profitability,appear to show a more distinct relationship between the Islamic bank dummy and that of commercial banks. When using the ROE, however, no significant difference was found between the two banks. When the factors influencing profitability were determined, strong correlation was found between the profitability of both banks and factors, such as NIM (+), cost-to-income ratio (+), and domestic credit ratio over GDP (-). However, the total asset growth rate appeared to only influence the profitability of Islamic banks, while the non-performing loan ratio had a negative correlation with commercial banks. This analysis shows that there are more similarities as funding intermediaries than differences in Islamic and commercial banks when determining profitability. Moreover, it can be implied that cost-efficiency and NIM (commission and fee income plus other revenue) are important factors influencing the profitability of Islamic banks as well.

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