Tipos de implantes

The sample studied here comprises of 61 banks from the Gulf Co-operation Council (GCC). It includes 23 full-fledged Islamic and 38 conventional banks, of which 18 own Islamic windows92. To begin the sample selection process, the complete list of all institutions licensed to operate as a bank was collected from each of the six GCC country’s central bank website93 at the start of January 2014. Any investment-only or special-purpose banks were then excluded. The sample therefore is limited to

commercial banks.

Data is collected from consolidated annual reports which include the parent bank and all its subsidiaries. All Islamic windows are therefore treated as part of the parent conventional bank rather than as separate Islamic banks94. This confines the Islamic bank category to full-fledged Islamic banks only. Banks which are owned by a non- banking parent/holding company have been included in the sample and are analysed at the bank (not the holding company) level, as these are expected to have greater control over their banking activity and strategic decision making compared to an existing bank’s subsidiary. The final sample also does not include any foreign banks. This is primarily because of data limitations as separate financial statements reporting on these banks’ GCC operations are not available. Most foreign banks produce consolidated financial reports (i.e. at the parent bank level) which do not explicitly provide enough information to permit the calculation of PLS levels as required for this work95.

92 _{Of the 38 conventional banks in the sample, 24 have Islamic windows. However, as data on PLS}

financing (musharakah and mudarabah) is not explicitly available in the annual reports of 6 banks, these have been included in the conventional bank category as their Islamic windows could not be included in the sample analysed.

93 _{Starting from the Central Bank’s list ensures that all banks operating in the GCC are considered for}

inclusion in the study and that the final sample is representative of the bank population in each country.

94 _{Treating Islamic windows as separate Islamic banks is not always possible especially as some Islamic}

window operations can simply be a branch rather than a stand-alone subsidiary. Given this, it is reasonable to assume that the decision-making authority regarding policies on sharia compliance including the provision of PLS financing is likely to be determined at the bank’s parent level rather than the window level, which further justifies limiting the Islamic bank category to full-fledged Islamic banks.

95

Exclusion of foreign banks has led to a substantial reduction in the number of analysable banks. However, without sufficient data on the Islamic banking operations (in particular, the share of PLS financing) financial ratios required for this study could not be calculated.

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Finally, data is collected for the four-year period following the financial crisis, namely 2009 – 201296. A breakdown of the sample banks per country and type is provided in Table 4.1.

Table 4.1: Number of Banks per Country and Type

General descriptive statistics for the sample banks and results of the univariate comparisons between Islamic and conventional banks are provided in Table 4.2. As indicated by the total assets value, which is commonly taken as a proxy for bank size, conventional banks, on average, are twice as large as Islamic banks with a mean total asset value of $23.09 billion compared to $11.72 billion for Islamic banks. This

difference in size is highly statistically significant as the p-value for the two-sided t-test reported at the bottom of the table illustrates. Further breakdown of conventional banks illustrates that this result is driven by the difference in size between Islamic banks and conventional banks with Islamic windows, as the latter have a mean total assets value which is almost three times as large as Islamic banks. Conventional banks without Islamic windows however are, on average, similar size to Islamic counterparts. The largest bank in the entire sample is also from the conventional banks with Islamic windows category, as the maximum value shows. Together, this suggests that the larger conventional banks tend to offer Islamic banking services through window operations. For all categories of banks, i.e. Islamic, conventional with and without Islamic

windows, the mean total assets value is higher than the median indicating that the 96 _{2012 was the latest year available at the time of data collection}

Country

Islamic Conventional Total With Islamic

Windows Without Islamic Windows Bahrain 5 5 10 2 3 Kuwait 4 5 9 0 5 Oman 0 6 6 0 6 Qatar 4 2 6 2 0 Saudi Arabia 4 7 11 6 1 UAE 6 13 19 8 5 Total 23 38 61 18a 20 a

In total there are 24 conventional banks with Islamic windows however, as data on PLS financing (musharakah and mudarabah) is not explicitly available in the annual reports for 6 banks, those Islamic windows could not be included in the sample analysed

Breakdown of Conventional Banks Number of Banks

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distribution is skewed to the right. This is due to the size of the largest banks in the sample which are almost 3-15 times larger than the median banks in their respective category. The variation in bank size is notable as the total assets value for the full sample ranges from less than $0.5 billion to over $95 billion. Variation in size is nevertheless smaller in the Islamic banking industry which has a standard deviation of 14 compared to 22.85 in the conventional banking industry.

Further details provided by the financing and investment ratios show that on average almost 60% of banks’ total assets are in the financing (i.e. loans) portfolio with a further 15% in the investments portfolio. Interestingly, the average investment ratios are

identical in Islamic and conventional banks, and while there is some variation between conventional banks with and without Islamic windows, this difference is not statistically significant. In contrast, there is a highly significant difference in the average financing ratio for Islamic and conventional banks, both with and without Islamic windows, as the average financing ratio in Islamic banks is lower, 55.7% compared to 61.7% in

conventional banks. This finding is consistent with prior literature, see e.g. Beck et al. (2013), which finds that Islamic banks on average tend to be less involved in the traditional banking activities which are highly reliant on intermediation through interest-generating loans97 and instead tend to have a higher share of fee-income than their conventional counterparts.

Similar to the financing ratio, standard deviation for the financing-to-deposit ratio is greater amongst Islamic banks (21.2%) compared to conventional banks (16.3%), revealing that there is greater variability in the Islamic banking industry relative to its conventional counterpart. The financing-to-deposit ratio is also lower in Islamic banks, with an average of 88.3% compared to 92.8% in conventional banks, although this difference is only marginally significant at the 10% level of significance and is insignificant when Islamic and conventional banks without Islamic windows are compared. Nevertheless, this comparison does indicate that the average Islamic bank intermediates less of the deposits it receives than its conventional counterpart.

97 _{For Islamic banks this includes sharia-compliant alternatives i.e. the non-PLS financing modes}

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Table 4.2: Descriptive Statistics and Univariate Test of Difference between Islamic and Conventional Banks

Mean Median Min Max St. Dev

Total Assets ($ billion)

All Banks 18.89 10.29 0.43 96.96 20.75

Islamic Banks 11.72 6.68 0.43 68.60 14.00

Conventional Banks 23.09 14.53 1.39 96.96 22.85

with Islamic Windows 34.93 29.77 1.93 96.96 21.84

without Islamic Windows 12.71 5.82 1.39 88.57 18.28

Financing Ratioa

All Banks 0.595 0.619 0.064 0.827 0.128

Islamic Banks 0.557 0.589 0.064 0.827 0.142

Conventional Banks 0.617 0.650 0.206 0.791 0.114

with Islamic Windows 0.616 0.625 0.422 0.771 0.084

without Islamic Windows 0.618 0.668 0.206 0.791 0.136

Investments Ratio

All Banks 0.153 0.145 0.017 0.431 0.091

Islamic Banks 0.153 0.145 0.017 0.307 0.079

Conventional Banks 0.153 0.145 0.023 0.431 0.096

with Islamic Windows 0.166 0.163 0.049 0.378 0.076

without Islamic Windows 0.142 0.097 0.023 0.431 0.110

Financing-to-Deposits Ratioa

All Banks 0.912 0.918 0.387 1.875 0.182

Islamic Banks 0.883 0.873 0.387 1.875 0.212

Conventional Banks 0.928 0.957 0.405 1.402 0.163

with Islamic Windows 0.932 0.926 0.572 1.402 0.144

without Islamic Windows 0.924 0.983 0.405 1.251 0.179

Deposit Ratio

All Banks 0.659 0.697 0.018 0.833 0.144

Islamic Banks 0.630 0.678 0.018 0.833 0.189

Conventional Banks 0.674 0.699 0.199 0.818 0.110

with Islamic Windows 0.668 0.694 0.382 0.793 0.088

without Islamic Windows 0.680 0.702 0.199 0.818 0.126

Capital Ratio

All Banks 0.163 0.143 0.076 0.902 0.092

Islamic Banks 0.203 0.159 0.076 0.902 0.138

Conventional Banks 0.140 0.137 0.081 0.238 0.031

with Islamic Windows 0.141 0.137 0.095 0.238 0.029

without Islamic Windows 0.140 0.136 0.081 0.227 0.034

cont. Balance Sheet Structure: Selected Indicators

Table 4.2: Descriptive Statistics and Univariate Test of Difference between Islamic and Conventional Banks

Looking now at the liability side of the balance sheet, as the deposit ratio indicates, customer deposits are the main source of funding for both Islamic and conventional banks, although the latter rely on this funding source to a greater extent than Islamic banks (67.4% versus 63% respectively). Breakdown of conventional banks further shows that conventional banks without Islamic windows have a slightly higher reliance on this funding source on average than conventional banks with Islamic windows, although the difference between the two is not statistically significant. The difference in the average deposit ratio between Islamic and conventional banks is also only

significant at the 10% level of significance. In contrast, the difference in the capital ratios between Islamic and conventional banks, both with and without Islamic windows, is highly statistically significant. Islamic banks have a higher capital ratio, averaging 20.3% compared to conventional banks with an average of 14%. This finding is consistent with prior studies which find that Islamic banks tend to be better capitalised than their conventional counterparts and that this has been an important factor in Islamic banks’ resilience during the financial crisis period (see e.g. Hasan and Dridi, 2010; Beck et al., 2013).

Overall, the comparison between Islamic and conventional banks’ balance sheet structures suggests that Islamic banks tend to be smaller than conventional banks, have

Difference in Means (p-values) IB v ACB IB v CBIW IB v CB CB v CBIW

Total Assets 0.000 0.000 0.694 0.000 Financing Ratioa 0.001 0.001 0.005 0.903 Investments Ratio 0.992 0.300 0.461 0.113 Financing-to-Deposits Ratioa 0.096 0.088 0.182 0.742 Deposit Ratio 0.052 0.102 0.049 0.520 Capital Ratio 0.000 0.000 0.000 0.768

a_{These are commonly referred to as 'loans ratio' and 'loan-to-deposit ratio' in conventional banking literature. In keeping with}

Islamic banking literature and industry analyst reports (e.g. the IFSB IFSI Stability report), the terms 'financing ratio' and 'financing-to-deposit ratio' are used here.

Univariate Test of Difference in Balance Sheet Characteristics between Islamic and Conventional Banks

Total Assets are in US $ billion, deflated using 2010 as the base year. Financing Ratio is calculated as Total Financing / Total Assets. Investments Ratio is calculated as Total Investments / Total Assets. Financing-to-Deposits Ratio is calculated as Total Financing / Total Customer Deposits. Deposit Ratio is calculated as Total Customer Deposits / Total Assets. Capital Ratio is calculated as Total Equity Capital / Total Assets. Values stated in the rows entitled 'Conventional Banks' are descriptive statistics for all conventional banks in the sample which include banks with and without Islamic windows. Further sub-sample breakdown, differentiating between banks with and without Islamic windows are presented in rows below. The acronyms IB refers to Islamic banks; ACB refers to all conventional banks; CBIW refers to conventional banks with Islamic windows and CB refers to conventional banks without Islamic windows. T-test for equality of means is calculated assuming unequal sample variances, two-sided p values are reported.

lower financing, deposit and financing-to-deposit ratios and therefore are less involved in the traditional banking intermediation activities, which relies on generating income through loans and funding via customer deposits. They do however, on average, hold almost identical proportion of their total assets in the form of investments. Finally, there is a significant difference in the capital ratios between the two industries as Islamic banks tend to be better capitalised than their conventional counterparts. The next subsection will now discuss the PLS measures that will be used in this chapter to evaluate and compare Islamic and conventional banks.