The Effect of Crude Oil Price on Islamic and Conventional Banks’ Profitability Case Study: OPEC Countries

This study investigates the effect of crude oil price variation on bank profitability. Examining 170 banks 36 Islamic banks and 134 conventional banks located in 13 OPEC countries from 2011 to 2016. Using panel data the study highlight bank-specific as well as macroeconomic variables. Moreover, it compares between Islamic and conventional banks, regarding their profitability and their sensitivity to the fluctuations of oil price. By using ROA, ROE, NIM and NNIM as proxies for bank profitability, our estimation analysis displays that there is positive relationship between oil price and bank profitability. Furthermore, our findings shows that oil price and bank profitability relationship is more significant in conventional banks than the Islamic ones. The results also disclose that cost efficiency is the most effecting variable on the profit of OPEC countries banks. Whereas, GDP growth this the least one. Keywords: Oil price, Islamic banks, Conventional banks, Bank profitability, OPEC, Panel data.