Credit Risk, Economic Growth and Profitability of Banks

Abstract

The determinants of banking profitability targeting the UAE banking sector was the main purpose of this study. There are different factors that affect the profitability of banks in UAE, the importance of each factor will be tested using regression models. By using a dataset of 14 banks for the period 2008-2016. Based on the findings the most important factor to improve the banking profitability are increase non-interest income, as well as the positive impact of economic growth on banking profitability. The study concluded that credit risk is one of the most important negative effects affecting the banks' financial performance by increasing non-performing loans and reducing the quality of total loans, which requires UAE banks to focus on increasing non-interest income and avoiding risk when lending to customers in addition to being cautious about it.