Global Economic Crisis : Assignment

Running head: FINANCIAL MANAGEMENT
Financial management
Name of the student
Name of the university
Author note

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Abstract
This is a study which will analyse the impact of the global economic crisis on the banks in
United Arab Emirates. The study will aim to highlight the profitability of the banks after the
global economic crisis. The four banks that are taken in to account belong to two categories,
Islamic and conventional banks. The banks that will be analysed to identify the profitability
are Dubai Islamic Bank, Sharjah Islamic Bank, Abu Dhabi Commercial Bank and
National Bank of Abu Dhabi. Dubai Islamic Bank was the bank who implemented the
principles of Islam in the all the practices of the organization. Thus, it can be concluded from
the analysis of the study that the impact of the global economic crisis of the conventional
banks have been huge and their return on investment have been hampered significantly.
However, the data suggest that there has been negligible impact of the global economic crisis
on the Islamic banks. Moreover, they have been able to provide stability to the macro
economic environment of the country. Thus, from the data it is suggested that the
conventional banks should rely less on debt for financing purposes. Moreover, the result
suggest that the Islamic banks are more profitable than the conventional banks. The return on
investment of the Islamic banks are stable and while there is lot of fluctuation in the ratios in
both the commercial banks. However, the bank that has been mostly impacted is the National
Bank of Abu Dhabi whose performance has decreased significantly over the years. Moreover,
the equity multiplier for the organization is too high which suggest that there the organization
highly dependent on debt for financing.

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Table of Contents
Introduction................................................................................................................................3
Statement of the problem...........................................................................................................4
Research Questions....................................................................................................................4
Objectives...................................................................................................................................4
Hypotheses.................................................................................................................................5
Literature review........................................................................................................................5
theoretical literature...................................................................................................................5
Dubai Islamic Bank..................................................................................................................12
Results and analysis.................................................................................................................19
Conclusion................................................................................................................................19
References................................................................................................................................20

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Introduction
This is a study which will analyse the impact of the global economic crisis on the
banks in United Arab Emirates. The study will aim to highlight the profitability of the banks
after the global economic crisis. The four banks that are taken in to account belong to two
categories, Islamic and conventional banks. The banks that will be analysed to identify the
profitability are Dubai Islamic Bank, Sharjah Islamic Bank, Abu Dhabi Commercial Bank
and National Bank of Abu Dhabi. Dubai Islamic Bank was the bank who implemented the
principles of Islam in the all the practices of the organization. It is one of the largest Islamic
bank in the United Arab Emirates (Dubai Islamic Bank ,2017). The organization being a
public joint stock company is listed in the Dubai Financial Market. The organization is
involved in both international and local partnerships and has a network of 200 branches in
Pakistan. The banking license of the organization was received from the Central Bank of
Jordon to work as a financial institution of Islamic nature. Sharjah Islamic Bank is also
bank which has implemented the Islamic principles in the banking system of their
organization (Sharjah Islamic Bank, 2017). The headquarter of the bank is in Emirates and
has been converted in to an Islamic bank in the year of 2004. On the contrary, the Abu Dhabi
Commercial Bank has been established as a public shareholding listing organization and had
limited liability. However, the government of Abu Dhabi holds 65% of the shares of the
company (ADCB, 2017). The rest of the funds of the organization is held by individuals and
financial institutions. The bank is a joint company which provides services in the field of
commercial, retail, merchant, investment, fund management and brokerage. National Bank
of Abu Dhabi is one of the largest lender bank in the United Arab Emirates and the market
capitalization of the bank is one of the largest. The headquarters of the bank is in Abu Dhabi
and is situated in the main financial district in Abu Dhabi. There is diversity in the portfolio
of the bank and provides services such as corporate, retail, investment and wholesale banking

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facilities. The other services provided by the bank includes wealth management, brokerage,
Islamic Banking, leasing and property management (NBAD UAE, 2017).
The study will evaluate the ROE of the banks, ROA of the bank, Equity multiplier
and asset utilization ratio. The comparative study will facilitate in understanding the
profitability of each of the banks and the causes behind it.
Statement of the problem
The global economic crisis had profound impact on all the banks all around the world.
However, the impact of the global economic crisis was different in Islamic banks and
conventional banks. The principles these banks follow is different so the impact of the global
economy will be different on both type of the banks. The study will analyse the profitability
of each of the banks by analysing their return on investment, return on asset and equity
multiplier ratio. These values will highlight the impact of the global economic crisis on each
of the banks and how they have coped up with it.
Research Questions
 What is the impact of global economic crisis on the Islamic banks?
 What is the impact of global economic crisis on the conventional banks?
 What is the significance of the global economic crisis on the profitability of the
Islamic banks?
 What is the significance of the global economic crisis on the profitability of the
conventional banks?
Objectives
The study aims to identify the impact of the global economic crisis on the banks in
United Arab Emirates. The study has chosen two conventional banks and two Islamic banks
which will be analysed based on their return on investment, return on asset and the equity

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multiplier. The findings form the study will be able to validate the existing theories of
literature and will provide a better understanding of the topic.
Hypotheses
H0 – The global economic crisis has impacted the profitability of the banks in United Arab
Emirates
H1 – The global economic crisis has not impacted the profitability of the banks United Arab
Emirates
Literature review
The literature review is divide in to two parts one is the theoretical literature and the
other is the empirical literature. The theoretical literature review will illustrate the various
theories from different researchers and the empirical literature review will consist of the
calculated data of all the banks that have been taken in to account.
theoretical literature
Islamic banks have similar roles when compared to the Conventional banks. The
Islamic Banks are the main sponsors to production of information and therefore supports in
addressing the problem of asymmetric information. They also facilitate in the reduction of the
transaction costs and assists in diversification for investors and small savers. During
conducting the organizational business, Islamic Banks mitigate risks which arise from the
operational, liquidity and asymmetric information problem. The fundamental difference
between Islamic and Conventional Banks is that Islamic banks operate in harmony with the
guidelines of Shariah which is the Islamic legal code (Waemustafa & Sukri, 2015).