Can Financial Ratios Reliably Measure the Performance of Banks in Bahrain?
- Naser J. Najjar
The aim of this study is to analyze the financial performance of major banks in Bahrain. This study covers the calculation of important financial ratios of major financial institutions in Bahrain as well as comparing their performance in the context of the global financial crisis. It also compares ratios of conventional banks with Islamic financial institutions in Bahrain. These ratios define profitability, financial performance, size and type of banks. The analysis of ratios shows the differences in financial management practices of banks in the respective areas. The study reveals that there are wide differences in the ratios used by different banks, especially before and after the financial crisis. This study helps identify best practice in the areas of profitability management, liquidity management, and interest rate risk management. The result of the analysis of ratios for measuring financial performance shows that there is corporate excellence in asset management and value equity shares. This analysis can be used as a basis for preventative actions for future bankruptcy and market risk. The components in financial statements for Islamic banks differ from conventional banks. The study recommends that banking institutions in Bahrain should use this ratio analysis to prevent unpredicted financial problems and take corrective measures or provisions to avoid such events for financial institutions.
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