Assessing the effect of dynamics of oil prices on banking sector profitability: evidence from UAE

Osman Sayid, Hassan Musse and Sharofiddin, Ashurov and Abdukadir Abdullahi Sheik-, Abdukadir (2026) Assessing the effect of dynamics of oil prices on banking sector profitability: evidence from UAE. Institutions and Economies, 18 (2). pp. 255-284. ISSN 2232-1640 E-ISSN 2232-1349

	PDF - Published Version Download (6MB)
	PDF - Supplemental Material Download (139kB)

Abstract

This study investigates the impact of oil price dynamics and other determinants on the profitability of banking sector. The analysis covers a six-year period, from 2017 to 2022, utilising panel data methods. The focus is on the United Arab Emirates’ banking sector, examining 10 banks, comprising both conventional and Islamic financial institutions. The random effects model results reveal a significant positive relationship between oil price dynamics and bank profitability, affirming the economic importance of oil. Loan loss provisions and leverage ratios exhibit negative and significant effects on profitability, underscoring prudent risk management needs and balanced leverage management to ensure sustained profitability. Deposit growth, deposit ratio, and income diversification positively and significantly influence bank profitability, reflecting opportunities to bolster performance. The study also uncovers a negative and significant correlation between cost efficiency and bank profitability, indicating the significance of cost efficiency in determining the profitability of the UAE banking sector. The findings have strategic implications for stakeholders to capitalise on oil revenue flows while supporting policies that account for asset quality, operational efficiency, and revenue diversification to drive long-term profitability and stability in the banking sector. The study suggests that future research should expand the sample size to include the GCC banks, in order to more comprehensively examine the effect of oil prices on banking sector profitability

Item Type:	Article (Journal)
Uncontrolled Keywords:	Oil price, Oil-exporting country, Loan loss provisions, GCC, UAE, Banking sector, Profitability
Subjects:	H Social Sciences > HG Finance > HG1501 Banking H Social Sciences > HG Finance > HG3368 Islamic Banking and Finance H Social Sciences > HG Finance > HG4001 Financial management. Business finance. Corporation finance.
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Institute of Islamic Banking & Finance (IIiBF)
Depositing User:	Dr Sharofiddin Ashurov
Date Deposited:	13 Apr 2026 09:39
Last Modified:	13 Apr 2026 09:39
Queue Number:	2026-04-Q2769
URI:	http://irep.iium.edu.my/id/eprint/128220

Actions (login required)

View Item