Financial Performance of Islamic Banks vs. Conventional Banks: The Case of UAE

Unquestionably, banks have a significant impact on every country’s economy. The good performance of a bank is one of the main factors that lead to the country’s economic stability. In this study, the financial performance of the two banking systems; the Islamic and the conventional banking systems in the United Arab Emirates, is being studied. The study’s prior objective is the comparison of the profitability ratio of banks and their Return on Assets (ROA) and Return on Equity (ROE). 4 Islamic banks and 7 Conventional banks in the UAE were chosen so that both the Islamic and Conventional banking systems would be compared and examined. The data used in this study were taken from the Banks’s yearly financial reports through the years 2005-2014. E-views software was applied to see what type of banking sector performed better over this period. Consequently, we cannot say that one banking system performed better than the other one since the independent variables affect the profitability of both banking sector negatively. Keywords: Islamic Banking, Conventional Banking, Profitability.