Muhanned OBEİDAT, Ahmad TARAWNEH, Mohammad KHATAİBEH, Ghassan OMET

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THE PERFORMANCE OF BANKS IN A DEVELOPING COUNTRY: HAS COVID-19 MADE ANY DIFFERENCE?

Purpose- The full implications of COVID-19 are yet to be seen. However, it has become clear that the virus has hit the supply and demand sides of economies, impacted banks and stocks markets, and led to significant decreases in the global flows of capital. Within this context, the purpose of this paper is to report on the performance of Jordanian banks in 2020, and examine the determinants of their performance. Methodology- To realize the objectives of this paper, the performance of all listed Jordanian banks (13) during the period 2010-2020 is examined in terms of return on assets (ROA) and net interest margin (NIM). Using the Seemingly-Unrelated Regression (SUR), the dependent variables (ROA and NIM) are regressed on independent variables that include equity capital, bank expenses, size, income diversification, loan loss provisions, lending to the government, and economic growth. Findings- The 2020 financial statements show that the profits of Jordanian banks (return on assets) have decreased from 1.43 percent in 2019 to 0.74 percent in 2020, or by about 48 percent. As far as the econometric results are concerned, it is interesting to note that while loan loss provisions impact bank profitability in a negative and significant manner, this “cost” is passed-on, at least partly, to bank customers in the form of wider costs of financial intermediation (NIM). Conclusions- While the known determinants of bank performance are applicable to the Jordanian banks, it is encouraging to note that these banks have managed to finish their 2020 financial year in a good shape. Indeed, this is the result of their strong financial positions that enabled them to increase their loan loss provision by large proportions.
Keywords:

Jordan, Banks Profitability, Net Interest Margin, Bank Size, Seemingly-Unrelated Regression,

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  • Yayın Aralığı: Yılda 4 Sayı
  • Başlangıç: 2014
  • Yayıncı: PressAcademia
Arşiv
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