Essay: Bank performance in Egypt

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  • Subject area(s): Finance essays
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  • Published on: November 16, 2017
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  • Bank performance in Egypt
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This research aims at examining the determinants of bank performance in Egypt by measuring the effect of the following factors: capital adequacy, assets quality, management quality, and liquidity on the bank performance measured by the profitability (return on equity) and the risk (the standard deviation of the return on equity ) in comparison analysis between Islamic and commercial banks.

Seven banks are chosen as a sample which was divided into three categories according to their nature: 3 Commercial banks 3 Islamic banks, and one mixed bank. The research used annual financial statements and reports published in each bank website for the period 2008 – 2016.

A series of multiple- regression and cross section analysis were employed for each model to test the hypotheses. The results show that the commercial banks are commanding in some figures. It was clear that there are significant differences between Islamic and commercial banks regarding financial measures. The commercial banks are superior in the management quality that was measured by the total loans to the total deposit ratio. The commercial banks are also superior in the liquidity management that was measured by net loans to the total assets. This mean that the Islamic banks take less risk by holding high level of liquidity which results in low profitability. In addition, bank type, whether the bank is conventional or Islamic, was proved to have some sort of influence on the determinants of the bank profitability.

Nowadays the banks play a significant role in our society, and it is not even possible to imagine the life without banks. In order to stimulate the economy of any specific country the government does this via banking system by using “Monetary Tools”. Moreover, all of the finance and business transactions that we are being involved in are done through the banks.

The banking industry occupies considerable importance in the economic, social and political life, due to the fact that the banking sector is the key element in the consolidation of the trust state policy and nurtured economic interests, and that requires work to create a strong banking sector, helping to supply the various sectors with the necessary funding to conduct its operations and to provide banking services of all kinds, it is necessary to evaluate the performance of banks in Egypt, and come up with a sound banking sector, it preserves the rights of depositors and investors by showing indicators of capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk.

Financial institutions are very important for any economy because they provide funds needed to keep economies on the path of economic growth and development. Financial ratios are indicators that reflect the financial health of any organization, including banks. Ratio analysis, here, is not only important for depositors, but also for management to improve future performance of banks.

There are several criteria are used as indicators to assess the performance of banks have been classified and discover aspects of the financial imbalance so early so that banks are not exposed problems that may lead to its collapse, and the most important of these standards system banks evaluated according to indicators of financial problems The resulting from field-testing process is called CAMELS, The importance of modern international indicators to assess banks and the early warning systems of their value performance as permanent and continuous tool for guiding and alert and warning to decision-makers and policy-makers the possibility of the Bank’s exposure to the crisis, and are introducing them prospects occur in early before the event to take the necessary policies, procedures and preventive or preventing the occurrence of crises.

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