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The Impact of Non-Interest Income on Commercial Bank Profitability in the Middle East and North Africa (MENA) Region

Author

Listed:
  • Bashar Abu Khalaf

    (Accounting & Finance Department, College of Business, University of Doha for Science and Technology, Doha 24449, Qatar)

  • Antoine B. Awad

    (Accounting & Finance Department, College of Business, University of Doha for Science and Technology, Doha 24449, Qatar)

  • Scott Ellis

    (Newcastle Business School, Accounting & Financial Management, Northumbria University Newcastle, Newcastle Upon Tyne NE7 7XA, UK)

Abstract

This study examines the effects of non-interest income on bank performance in the Middle East and North Africa (MENA) region, addressing existing research gaps and conflicting results. The analysis is based on data from 40 banks (5 banks from each country) operating in Bahrain, Egypt, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates between 2010 and 2022. Using correlation analysis and three regression models (OLS, FE, and RE), this study explores the relationship between non-interest income, overheads, capital adequacy, loan loss provision, bank size, and return on assets. The findings reveal positive associations among banks’ overhead, size, capital adequacy, and loan loss provision. Additionally, a favorable correlation is observed between non-interest income and bank performance. Non-interest income significantly influences the profitability of MENA region banks across all three models, supporting the main hypothesis. While the study’s limitations include sample size and geographic focus, the findings of this study provide valuable insights for policymakers, allowing them to recognize the positive impact of increasing non-interest income on commercial bank profitability in the MENA region and consider implementing policies that encourage and support banks in diversifying their income sources.

Suggested Citation

  • Bashar Abu Khalaf & Antoine B. Awad & Scott Ellis, 2024. "The Impact of Non-Interest Income on Commercial Bank Profitability in the Middle East and North Africa (MENA) Region," JRFM, MDPI, vol. 17(3), pages 1-15, March.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:3:p:103-:d:1349521
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    References listed on IDEAS

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    Cited by:

    1. Antoine B. Awad & Robert Gharios & Bashar Abu Khalaf & Lena A. Seissian, 2024. "Board Characteristics and Bank Stock Performance: Empirical Evidence from the MENA Region," Risks, MDPI, vol. 12(5), pages 1-23, May.

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