Liquidity Analysis of UAE Banks

The aim of this paper is to analyze the liquidity levels of various banks in the UAE for the period 2005-2009. To understand the behavior of liquidity indicators especially during the financial crisis, the researcher will analyze the four liquidity indicators over the years 2005 to 2009. The findings highlight how the banks in question have been impacted by the 2007-2008 crisis. This can most obviously be seen in the notable decline of each of the banks liquidity level in 2009. The effect of loans to total assets, loans to customers’ deposit, and investment to total assets ratios for the five banks was most notable in 2009. Two liquidity ratios were analyzed in order to determine the banks’ ability to honor its debt obligations, these being loans to total assets and loans to customers respectively. The third ratio was the total equity to total assets to assess the liquidity level in the capital structure, while the fourth ratio was the investment to total assets to measure the managing of liquidity. While Bank liquidity was affected by the crisis, bank performance remained relatively stable, as measured by coefficient of variation, since these banks were able to yield more control over cash flows in comparison to revenues and costs.