In this year’s The Asian Banker Strongest Islamic Banks By Balance Sheet evaluation, Al Rajhi Bank remained on top of the ranking of the strongest Islamic banks based on a detailed and transparent scorecard that evaluates Islamic banks on six areas of balance sheet financial performance, namely the ability to scale, balance sheet growth, risk profile, profitability, asset quality and liquidity.
Saudi Arabian and Qatari Islamic banks attained the highest average strength score of 3.91 and 3.62 out of 5 respectively. Kuwaiti and Turkish banks achieved higher average strength score than that recorded by all the 100 Islamic banks, at 3.27 out of 5. The average return on asset (ROA) of Saudi Arabian and Qatari Islamic banks reached 1.91% and 1.52% respectively, compared with the global average of 1.05%. Saudi Arabian Islamic banks remained well capitalised, maintaining a 19.5% average capital adequacy ratio (CAR), while the average gross non-performing loan (NPL) ratio and loan loss reserves (LLRs) to gross NPLs ratio stood at 1.3% and 251% respectively.
The top 10 Strongest Islamic Banks comprise three Saudi Arabian banks, three Qatari banks, two Turkish banks and one each from Kuwait and Pakistan. Al Rajhi Bank performed strongly in most indicators and registered a 22% growth in assets. Qatar Islamic Bank placed second, with a 1.8% ROA and a 20.1% cost to income ratio. It maintained a CAR of 19.4% and its asset quality also remained relatively sound. However, its liquid assets to total deposits and borrowings ratio was at a low level of 12.7%. Dubai Islamic Bank, the second largest Islamic bank in the world, ranked 11th in the ranking of the Strongest Islamic Banks.
Meezan Bank, Bank Islam Malaysia (BIMB) and Maybank Islamic are the top three strongest Islamic banks in Asia. The three banks maintained strong levels of capitalisation as evidenced by the CAR of above 18%. Meezan Bank excelled in profitability and liquidity, while BIMB and Maybank Islamic showed better performance in asset quality. The ROA of Meezan Bank improved from 1.6% in 2019 to 1.8% in 2020, and its liquid assets to total deposits and borrowings ratio was higher at 67% in 2020. Maybank Islamic saw its ROA weaken to 0.6% from 1.08%, and BIMB’s ROA was also reduced from 0.97% to 0.82%. However, the gross NPL ratio of Meezan Bank deteriorated to 2.8% in 2020 from 1.8% in the year earlier. Both BIMB and Maybank Islamic witnessed improvement in asset quality. The gross NPL ratio of BIMB was down from 0.86% to 0.67%, while the gross NPL ratio of Maybank Islamic improved from 1.62% to 1.19%.
For a full explanation of the evaluation criteria please click here.
Notes: (1) 5 = Highest score, 0 = Lowest score *Scores are only shown to one decimal place, but rankings reflect full information.
Source: TABInsights
As an enthusiast with a deep understanding of Islamic banking and financial institutions, I can confidently analyze the provided article on The Asian Banker's evaluation of the Strongest Islamic Banks By Balance Sheet. The evaluation utilizes a comprehensive scorecard that assesses Islamic banks on six key areas of balance sheet financial performance: the ability to scale, balance sheet growth, risk profile, profitability, asset quality, and liquidity. This approach ensures a detailed and transparent analysis, providing a holistic view of the strength of Islamic banks.
Let's break down the key concepts mentioned in the article:
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Ranking Criteria:
- The evaluation is based on six areas of balance sheet financial performance, including:
- Ability to scale
- Balance sheet growth
- Risk profile
- Profitability
- Asset quality
- Liquidity
- The evaluation is based on six areas of balance sheet financial performance, including:
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Regional Strength Scores:
- Saudi Arabian and Qatari Islamic banks achieved the highest average strength scores of 3.91 and 3.62 out of 5, respectively.
- Kuwaiti and Turkish banks surpassed the average strength score of all 100 Islamic banks, achieving a score of 3.27 out of 5.
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Return on Asset (ROA):
- The average ROA for Saudi Arabian and Qatari Islamic banks is 1.91% and 1.52%, respectively, compared to the global average of 1.05%.
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Capital Adequacy Ratio (CAR):
- Saudi Arabian Islamic banks maintained a strong average CAR of 19.5%.
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Non-Performing Loan (NPL) Ratios:
- The average gross NPL ratio for Saudi Arabian Islamic banks is 1.3%.
- The NPL ratio and loan loss reserves (LLRs) to gross NPLs ratio stand at 1.3% and 251%, respectively.
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Top 10 Strongest Islamic Banks:
- The top 10 include three Saudi Arabian banks, three Qatari banks, two Turkish banks, and one each from Kuwait and Pakistan.
- Al Rajhi Bank performed exceptionally well, registering a 22% growth in assets.
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Individual Bank Performances:
- Qatar Islamic Bank ranked second, with a 1.8% ROA and a 20.1% cost to income ratio.
- Meezan Bank, Bank Islam Malaysia (BIMB), and Maybank Islamic are the top three strongest Islamic banks in Asia.
- Dubai Islamic Bank, the second-largest Islamic bank globally, ranked 11th in the evaluation.
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Performance Metrics:
- Meezan Bank excelled in profitability and liquidity.
- BIMB and Maybank Islamic showed better performance in asset quality.
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Financial Indicators for 2020:
- Meezan Bank's ROA improved from 1.6% in 2019 to 1.8% in 2020, with a liquid assets to total deposits and borrowings ratio of 67%.
- Maybank Islamic saw a weakened ROA to 0.6%, and BIMB's ROA reduced from 0.97% to 0.82%.
- Meezan Bank's gross NPL ratio deteriorated to 2.8% in 2020, while BIMB and Maybank Islamic witnessed improvement in asset quality.
In summary, this evaluation by The Asian Banker provides a thorough assessment of the strongest Islamic banks, highlighting their performance across key financial indicators. The detailed scorecard and transparent criteria contribute to the credibility of the rankings, offering valuable insights into the Islamic banking landscape.
