Financial performance of conventional and Islamic banks in Bahrain: a comparative study

  • Received October 31, 2019;
    Accepted December 18, 2019;
    Published December 24, 2019
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/bbs.14(4).2019.18
  • Article Info
    Volume 14 2019, Issue #4, pp. 192-205
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The main purpose of this study is to identify the variables that influence the financial performance of both types of banks, Islamic and conventional, and compare their financial performance over the period of 2003–2016. Banks listed on the Bahrain Bourse as of December 31, 2016 were used in the study, with a total of seven banks, of which three are Islamic and four are conventional. To make an appropriate comparative study, financial ratio analysis is used. Multiple regression and paired sample t-test are used to analyze the data. Return on assets (ROA) and return on equity (ROE) are considered as the basis for measuring financial performance and are set as dependent variables. The analysis of the results shows that conventional banks perform better than Islamic banks in terms of profitability. The results also show that ROA is significantly related to risk, cost of intermediation and efficiency ratios, while ROE is highly influenced by risk ratios only. Moreover, it was found out that the relationship between asset size and the performance of banks is insignificant, while the relationship between the number of branches and both ROA and ROE is significant.

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    • Table 1. Summary statistics of independent variables and their impact on bank performance (2003–2016)
    • Table 2. Correlation coefficients between independent variables
    • Table 3. Regression statistics
    • Table 4. Analysis of variance statistics
    • Table 5. Test statistics of regression coefficients – Models (1), (2), (3) and (4)