Internal determinants of the profitability of Islamic banks in Saudi Arabia (2005-2021): An Empirical Study

Abstract

This study aimed to reveal the internal determinants affecting the profitability of Islamic banks in Saudi Arabia. The study adopted the descriptive analytical approach by analyzing the data available in the annual reports of those banks. The study was applied to a sample of (4) Islamic banks in Saudi Arabia, namely: Al Rajhi Bank, Bank Al Jazira, Alinma Bank, and Bank Al Bilad. The results of the study showed a positive impact of the internal determinants represented by bank size (Z), capital ratio (CAD), and asset management (EAM) on the profitability of Islamic banks in Saudi Arabia, while it was found that the internal determinant Operating efficiency (OE) negatively affects the profitability of Islamic banks in Saudi Arabia. It has also been shown that enhancing capital adequacy (CAD), increasing the deposit ratio (DR) and asset management ratio (EAM) contribute to enhancing profitability in those banks. In light of the results, the study recommended conducting further studies on other internal determinants and external determinants affecting the profitability of Islamic banks in Saudi Arabia.