Required Task:

"You are required to appraise the performance of two Islamic banks allocated to you after conducting an empirical analysis of the portfolio of products and services offered by the banks”

Details:

In order to achieve the given task, you will develop a table of products and services that the two banks offer to the customers and briefly discuss the range of products offered by the bank. Instead of listing every single product/service you are required to identify categories of financial products e.g Personal loans, business financing, house purchase loans (mortgages), credit cards, insurance etc.

You will then focus upon reporting the performance of the two banks allocated to you using growth in turnover, net profit and net assets and ROAs and Credit rating (if any) as constructs of performance. of the two banks over last three years. In order to do this, you will download the annual reports of last two years of the two banks from their websites to carry out the empirical analysis.

The research report needs to be written in the form of an academic paper. Word count for the paper is 2000 with 10% +/- allowance.

Further guidance on the marking scheme:

Structure:

The submitted work should follow the recommended structure of a report. This includes an Abstract and proper sectioning of the written report. (10)

Research evidence

If relevant empirical data has been collected for the two banks? (10)

If relevant professional websites/publications have been consulted? (10)

If relevant academic refereed articles have been accessed and used for enriching the analysis? (10)

Critical analysis

Whether various viewpoints about performance of Islamic Banks s in general have been made use of when interpreting the performance of the two banks? (10)

Whether previous published research been made use of when analysing the performance of the two banks? (10)

Whether possible reasons of good or bad performance been considered to interpret performance of the banks? (10)

Presentation

Language and formatting mistakes are not very noticeable (5)

Good use of charts/infographs (10)

Good sensible conclusion (5)

Referencing

All claims/facts supported by relevant references (6)

Referencing follows Harvard Referencing Style (4)

Follow the layout and the information given below please

Abstract -200 words

Introduction (150 words)

Tell the main purpose of the research report and how the paper is organised into various sections

An overview of Products and services (400 words)

Compare and contrast what products are offered by both banks.

Sharjah Islamic Bank is one of the most popular banking institutions in the UAE. The organization is a listed public organization. Head quartersof the organization is located in the emirate of Sharjah, UAE. The banking organization was established in 1976. Previously, however, the banking organization is known as the Sharjah National Bank. In 2004, the organization was converted into a fully shared compliant bank. The organization operates its business activities in the finance and insurance sector. The banking company provides quality services through it sonline retail division. The public can set up a bank account to get useful services of the banking organization. Apart from the public, the organization maintains its corporate clients through Corporate Banking Services. Business organizations can register their name in the online banking service of Sharjah Islamic Bank. In this case, business organizations can be able to transfer their funds to the international market. The offline service of the banking organization is also efficient. In the UAE, the banking organization has morethan 100 ATMs. Through these ATMs, the public and other entities can easily withdraw cash according to their requirements. Moreover, peoplecan also deposit their money through the ATM machine to save money. Banking organizations also provide current account facilities forcompanies and individuals. In this case, 3000 AEDs must be maintained as a minimum balance. The corporate must maintain the amount of AED15000 as a minimum balance in order to obtain useful benefits from the current accounts. In addition, the banking organization has a call centerthat can provide people with important information about their accounts . Peoples can also choose their currency such as AED, USD, GBP, and Euro.

(14) (PDF) Analyzing the Performance of Sharjah Islamic Bank. Available from: https://www.researchgate.net/publication/342703349_Analyzing_the_Performance_of_Sharjah_Islamic_Bank [accessed Mar 08 2021].

Abu Dhabi Islamic Bank was established on 20 May 1997 as a Public Joint Stock Company through the Amiri Decree No. 9 of 1997.Abu Dhabi Islamic Bank (ADIB) carries out its operations in the National commercial banks’ sector. The bank is headquartered in the United Arab Emirates. The bank is a public listed company majoring in the provision of Sharia-compliant Islamic financial products, investment and banking products and services. Throughout the country (United Arab Emirates), Abu Dhabi Islamic Bank has a total of 69 branch networks. For this study, we will evaluate the Al Bateen main branch. The branch operates under five main business segments that are: the wholesale banking segment, which offers credit facilities and financial services current accounts and deposit accounts both for institutional and corporate customers, the retail segment offers commercial and consumer Ijara, Murabaha, funds transfer facilities and Islamic covered card.

Compare and contrast what products are offered by both banks

Sharjah Islamic Bank

Operating income

Income from Mudarab and wakala with financial institution

• 2019 509,220

• 2018 (2,235,949)

Income from investing in Islamic finance and sukuk

• 2019 1,74,660

• 2018 1,589,597

Profit for the year

• 2019 545,525

• 2018 510,379

Abu Dhabi Islamic Bank:Operating income

Income from Mudarab and wakala with financial institution

• 2019: 131,299

• 2018: 100,271

Income from Murabaha, mudaraba, ijara and other islamc financing from custome

• 2019: 4,500,165

• 2018: 4,520,470

Income from sukuk measured at amortised cost

• 2019 500,556

• 2018 349,514

Profit for the year before Zakat and Tax

• 2019 2604,064

• 2018 2,505,608

Performance (800 -1200 words)

Use various constructs of performance (ROA, Growth figures and credit ratingsfor both banks and compare and contrast for last three years. Also compare with banking industry’s average ROA if known. Use graphs to improve visibility.

Sharjah Islamic Bank

file:///C:/Users/user/Downloads/7991d3da74f3d30da9f5dacb2e39392d3b708345.pdf

https://gulfnews.com/business/banking/sharjah-islamic-bank-posts-dh4058m-2020-net-profit-

1.76614683

The highest assets in Sharjah-islamic bank is investment in financing

2020: 29,268,559

2019: 25,142,892

2018: 24,217220

The highest liabilities is customer’s deposited

2020: 33,608,308

2019: 27,31305

2018: 26,438,275

The balance sheet showed the bank’s total assets of Dh52.7 billion at the end of June 2020, a growth of 13.5 per cent compared to Dh46.4 billion at the end of 2019.

Financing facilities reached Dh29.7 billion, an increase of Dh3.9 billion or 15.6 per cent compared to Dh25.1 billion last year. SIB’s customer deposits increased by 18 per cent, to reach Dh32.2 billion compared to Dh27.3 billion at the end of 2019.

https://gulfnews.com/business/banking/sharjah-islamic-bank-reports-dh2512m-net-profit-in-first-half-2020-1.72734467

https://www.sib.ae/uploads/media/default/0001/05/2911a195cce66bc7137d01965429c87f5d7e7c81.pdf

Group net profit for 2019 increased by 4.0% to AED 2,601.1 million vs. AED 2,500.8 million in 2018. Group net revenues for 2019 grew by 2.5% to AED 5,915.2 million vs. AED 5,769.5 million in 2018 due to growth in customer finance and higher investment and foreign exchange income.

Net profit margin was 4.25%, despite lower rates in the market, helped by the positive impact of the low cost of funds and a growth in customer financing.

Operating expenses at AED 2.6 billion were flat year-on-year, reflecting cost discipline initiatives that led to a decrease of 1% in cost to income ratio. This was achieved despite investments in key strategic and digital initiatives designed to support business growth, enhance customer experience and create future efficiencies .m

Total assets as of 31 December 2019 were AED 125.9 billion, representing an increase of 0.6% from AED 125.2 billion at the end of 31 December 2018.

Net customer financing increased by 3.1% to AED 81.1 billion from AED 78.7 billion at the end of 31 December 2018.

Credit provisions and impairments for 2019 increased by 6.1% to AED 658.1 million vs. AED 620.1 million in 2018, with net cost of risk increasing to an annualised 78 bps.

CASA deposits increased by AED 1.7 billion (2.5% increase year on year) to AED 69.8 billion as at 31 December 2019, comprising 69% of the 101.4 billion total customer deposits compared to 67.8% a year earlier.

Our advances to stable funds ratio increased in Q4 2019 to 84.1% from 82.9% at 31 December 2018 reflecting our ability to make optimal use of the balance sheet.

The bank’s common equity tier 1 ratio of 13.11% and capital adequacy ratio of 18.88% remains well above minimum requirements.

Abu Dhabi: Abu Dhabi Islamic Bank (ADIB) on reported a net profit of Dh1.6 billion for the full year 2020 compared to Dh2.6 billion in 2019.

Income from financing activities in 2020 was Dh3.32 billion, down 12.9 per cent from 2019 primarily due to a balance sheet repricing driven by the impact of a low-rate environment.

Total assets grew 1.5 per cent year-on-year to Dh 127.8 billion. Customer financing increased 2.8 per cent year-on-year to Dh83.4 billion, primarily driven by 8.6 per cent growth in corporate financing. Customer deposits were at Dh101.3 billion. Current Account and Savings Account (CASA) balances grew 12.3 per cent to Dh89.3 billion, and now represent 88.2 per cent of total deposits.

Balance sheet

Total assets grew 1.5 per cent year-on-year to Dh 127.8 billion. Customer financing increased 2.8 per cent year-on-year to Dh83.4 billion, primarily driven by 8.6 per cent growth in corporate financing. Customer deposits were at Dh101.3 billion. Current Account and Savings Account (CASA) balances grew 12.3 per cent to Dh89.3 billion, and now represent 88.2 per cent of total deposits.

https://gulfnews.com/business/banking/abu-dhabi-islamic-bank-reports-dh16-billion-net-profit-in-2020-1.1613325886719

https://www.adib.ae/en/SiteAssets/Annual%20Reports/Annual-Report_2019_EN.pdf

Whether various viewpoints about performance of IBs in general have been made use of when interpreting the performance of the two banks?

interpreting the performance of the two banks to the about performance of Islamic bank is performing using the following points.

Total Operating Profit

Operating profit indicates profit earned from its core business activity. It

does not include income from investments and effect of taxes. Growth in

operating profit is necessary to grew in the market.

AAG Rate of Total Operating Profit 2005-10 (Bank Group-Wise)

2006 2007 2008 2009 2010 AAG Rate

Islamic Banks 49.27 34.33 -4.55 -30.35 -4.34 8.87

Conventional Banks 21.46 14.76 6.42 -30.74 -18.06 -1.55

It may be observed from the analysis that Islamic banks reported a higher AAG

rate of operating profit. The AAG rate stood at 8.87% for Islamic banks during

146 Comparative Study on Performance of Islamic and Conventional Banks

2005-10, while it reported a negative -1.55% AAG rate. A further analysis

revealed a reduced growth mainly after 2007 mainly due to financial crisis and

for Profitability Operating Margin +21.75 % which is considered high

however, ABU DHABI ISLAMIC bank Operating Margin is 54,3% which means that Abu dhabi Islamic bank is performing better.

Return on Total Equity (ROE)

A higher ratio indicates better use of capital. It calculated by dividing net

profit after tax by total equity. Total equity is sum total of capital and reserves. It

may be observed from the analysis that Islamic banks carry a higher ROE

compared to conventional banks. As may be seen in other performance indicators,

there exists a decline in ROE ratio of Islamic banks over the years.

Sh is Return on Equity 7.06. which is low whearse Abu dhabi Islamic bank is performing better represents a healthy return on equity of 18.9%

Total Asset

The total assets of Islamic banks and conventional banks moved positively

during 2005-10 but marginally affected by the recessionary trends since 2007. It

may be observed from the analysis that Islamic banks reported a higher AAG rate

of total asset than conventional banks. The total assets of Islamic banks grew by

21.53% during 2005-10, while the growth rate is 18.42% for conventional banks.

Sharjah Islamic Bank is Total Asset Turnover 0.04 which is good

A lower debt-to-asset ratio suggests a stronger financial structure, just as a higher debt-to-asset ratio suggests higher risk. Total Asset ratio for Abu dhabi Islamic bank is 0,80%.

http://www.scienpress.com/Upload/JAFB/Vol%202_3_6.pdf

https://www.wsj.com/market-data/quotes/AE/SIB/financials

Whether possible reasons of good or bad performance been considered to interpret performance of the banks?

Use the points from the report to answers

Explain the graphs to answered from the last two years.

Reword the points below

Dhabi Islamic Bank is one of the biggest banks of the Arab region, due to its popularity and position in the UAE and the Arab region generally. ome of these ratios were positive and some were negative for Abu Dhabi Islamic Bank, but all of that is understandable considering that ADIB is an Islamic bank, and the normal case for Islamic banks is to not have an exceptional revenue of even exceptional results from these ratios.

Abu Dhabi Islamic Bank has peaked at almost 50% of the whole sector, as in the assets of ADIB is almost half of the whole assets of all the Central Bank of the UAE’s assets, which is truly astonishing and definitely boosted the popularity of this particular bank,

ratios of earning efficiency to Abu Dhabi Islamic Bank we can notice a strong raise in all of the 3 ratios provided, which means that ADIB has been doing a significant job in this manner, as it has increased all 3 ratios in a great manner.

(14) (PDF) Performance Evaluation of Abu Dhabi Islamic Bank. Available from: https://www.researchgate.net/publication/342703436_Performance_Evaluation_of_Abu_Dhabi_Islamic_Bank [accessed Mar 10 2021].

Sharjah Islamic Bank. The financial performance shows The key problem is that the bank is not in a position to produce higher income from the successful use ofequity and debt funds. On the other hand, the income generated from the use of the assets is also very low. When thebank fails to take constructive steps, the bank is more likely to lose its competitiveness. The financial institution is also required to adoptinnovative financial technologies and offer higher deposit rates in order to increase its competitiveness

(14) (PDF) Analyzing the Performance of Sharjah Islamic Bank. Available from: https://www.researchgate.net/publication/342703349_Analyzing_the_Performance_of_Sharjah_Islamic_Bank [accessed Mar 10 2021].

Total Assets to Total Sector Assets in 2018, the ratio of total assets to total sector assets increased due to a high increase in the total assets of the bank and an increase in the total assets of the sector. However, the ratio decreased in 2019 due to a significant increase in the total assets of the sector, but the ratio remained above average

The bank's return on assets is below the average in 2019. The key reason behind the lower ratio is that the bank is unable to produce higherincome by using its assets to its full potential. In addition, the bank has more obsolescent assets that are not productive. T

(14) (PDF) Analyzing the Performance of Sharjah Islamic Bank. Available from: https://www.researchgate.net/publication/342703349_Analyzing_the_Performance_of_Sharjah_Islamic_Bank [accessed Mar 10 2021].

Conclusion (400 words)

Make conclusions based on your earlier analysis about products and performance of two banks linking with performance of IBs in general as appearing in the published research.

References

All claims/facts supported by relevant references

Referencing follows Harvard Referencing Style at least 10 of them.