Bank Ownership and Performance in the Middle East and North Africa Region

Although both domestic and foreign private banks have gained ground in MENA in recent years, state banks continue to play an important role in many countries. Using a MENA bank-level panel dataset for the period 2001-08, the paper contributes to the empirical literature by documenting recent ownership trends and assessing the role of ownership and bank performance in MENA while accounting for key bank characteristics such as size and balance sheet composition. The paper analyzes headline performance indicators as well as their key drivers and finds that state banks exhibit significantly weaker performance, despite their larger size. This result is mainly driven by a larger holding of government securities, higher costs due to larger staffing numbers, and larger loan loss provisions reflecting weaker asset quality. The results reflect both operational inefficiencies and policy mandates. The paper also provides a detailed performance analysis of foreign and listed banks. Foreign banks are fairly new in MENA, yet perform on par with domestic banks despite their smaller size and higher investment costs. Listed banks exhibit superior performance driven by higher interest margins even in the face of higher costs associated with listing. Taken together, the results do not reject the development role for state banks, but do show that their intervention comes at a cost. As such, there is scope to reduce the share of state banks in some countries and to clarify the mandates, improve the governance, and strengthen the operational efficiency of most state banks in MENA.

Bibliographic Details

Main Authors:	Farazi, Subika, Feyen, Erik, Rocha, Roberto
Format:	Policy Research Working Paper biblioteca
Language:	English
Published:	2011-04-01
Subjects:	ACCESS TO CREDIT, ACCESS TO FINANCE, ACCOUNTING, ADVISORY SERVICES, AGRICULTURAL BANKS, ASSET QUALITY, ASSETS RATIO, ASSETS RATIOS, ASYMMETRIC INFORMATION, AUCTIONS, BAILOUTS, BALANCE SHEET, BANK ASSETS, BANK COMPETITION, BANK INTEREST MARGIN, BANK INTEREST MARGINS, BANK LENDING, BANK POLICY, BANK PRIVATIZATION, BANK PROFITABILITY, BANK REGULATION, BANK REGULATIONS, BANK SIZE, BANKING ASSETS, BANKING INSTITUTIONS, BANKING REGULATION, BANKING SECTOR, BANKING SECTORS, BANKING SYSTEM, BANKING SYSTEMS, BORROWINGS, BRANCH NETWORK, BRANCH NETWORKS, CAPITAL MARKET, COLLATERAL, COLLATERAL REGIMES, COMMERCIAL BANK, COMMERCIAL BANKS, COMMERCIAL LOANS, CONNECTED LENDING, CONSUMER LENDING, CORPORATE GOVERNANCE, CREDIT ALLOCATION, CREDIT BUREAUS, CREDIT CARDS, CREDIT DECISIONS, CREDIT GROWTH, CREDIT GUARANTEE, CREDIT GUARANTEES, CREDIT INFORMATION, CREDIT INFORMATION SYSTEMS, CREDIT MARKETS, CREDIT REGISTRIES, CREDIT REPORTING, CREDIT REPORTING SYSTEMS, CREDIT SCORING, CREDITOR, CREDITOR RIGHTS, CREDITS, DEBT FINANCE, DEFAULT RATES, DEMAND DEPOSITS, DEPOSIT, DEPOSIT ACCOUNTS, DEPOSITS, DERIVATIVES, DEVELOPING COUNTRIES, DEVELOPMENT BANK, DISCLOSURE REQUIREMENTS, DIVERSIFICATION, DOMESTIC BANKS, DOMESTIC CREDIT, DUMMY VARIABLE, EARNING ASSETS, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIES OF SCALE, EMPLOYEE, EMPLOYMENT, ENFORCEMENT OF CONTRACTS, EQUALITY, EQUITY INVESTMENTS, EXCHANGE COMMISSIONS, EXIT MECHANISM, EXPATRIATE, EXTERNAL FUNDING, EXTERNALITIES, FINANCIAL CRISIS, FINANCIAL DEVELOPMENT, FINANCIAL INFRASTRUCTURE, FINANCIAL INSTITUTIONS, FINANCIAL INTERMEDIATION, FINANCIAL LIBERALIZATION, FINANCIAL MARKET, FINANCIAL PERFORMANCE, FINANCIAL SECTOR REFORMS, FINANCIAL SERVICES, FINANCIAL SYSTEM, FINANCIAL SYSTEMS, FIXED ASSETS, FIXED COSTS, FOREIGN BANK, FOREIGN BANKS, FOREIGN EXCHANGE, GOVERNANCE STANDARDS, GOVERNMENT DEBT, GOVERNMENT FINANCING, GOVERNMENT OWNERSHIP, GOVERNMENT SECURITIES, GUARANTEE SCHEMES, HELD TO MATURITY SECURITIES, HOLDING, HOUSEHOLDS, HOUSING, HOUSING FINANCE, IMPLICIT GOVERNMENT GUARANTEE, INCOME-GENERATING ACTIVITIES, INDIVIDUALS, INEQUALITY, INFORMATION ASYMMETRIES, INFORMATION SHARING, INSTITUTIONAL ASPECTS, INSURANCE, INTANGIBLES, INTEREST COSTS, INTEREST EXPENSE, INTEREST INCOME, INTEREST MARGIN, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL BANKS, INTERNATIONAL FINANCE, INVESTMENT DECISIONS, INVESTMENT FINANCE, INVESTMENT LOANS, ISLAMIC BANK, ISLAMIC BANKING, ISLAMIC BANKS, JOINT VENTURE, LACK OF COMPETITION, LENDERS, LENDING TECHNIQUES, LETTERS OF CREDIT, LEVY, LIMITED, LOAN, LOAN LOSS PROVISIONS, LOAN PORTFOLIO, LOAN PORTFOLIOS, LOCAL BANKS, LOCAL MARKETS, LONG-TERM FUNDING, LONG-TERM INVESTMENT, MANDATES, MARKET FAILURES, MARKET INSTITUTIONS, MARKET PARTICIPANTS, MARKET SHARE, MARKET SHARES, MATURITY, MEASURES OF PROFITABILITY, MORTGAGE LOANS, NET INTEREST MARGIN, NON PERFORMING LOANS, NON-PERFORMING LOANS, NONPERFORMING LOANS, NPL, OPERATING COSTS, OPERATING EXPENSES, OPERATING INCOME, OVERHEAD COSTS, OWNERSHIP STRUCTURE, OWNERSHIP STRUCTURES, PARTIAL CREDIT, PENSION, PERFORMANCE ANALYSIS, PERSONNEL EXPENSES, PRIVATE BANK, PRIVATE BANKING, PRIVATE BANKS, PRIVATE CREDIT, PRIVATE CREDIT BUREAUS, PRIVATE OWNERSHIP, PRIVATIZATION, PROFITABILITY, PROFITABLE BUSINESS, PUBLIC BANKS, PUBLIC CREDIT, PUBLIC DEBT, REAL ESTATE, REGIONAL BANKS, REMITTANCES, RESERVE, RESIDENTIAL MORTGAGE, RETURN, RETURN ON ASSETS, RETURN ON EQUITY, RETURNS, RETURNS ON EQUITY, RISK MANAGEMENT, SHARE OF GOVERNMENT SECURITIES, SHARE OF INVESTMENT, SHAREHOLDER, SHAREHOLDERS, SHORT-TERM BORROWINGS, SOCIAL SECURITY, STATE BANK, STATE BANKS, STATE ENTERPRISES, STATISTICAL ANALYSIS, STOCK EXCHANGE, STOCK MARKET, STOCK MARKETS, STOCK OPTIONS, SUPERVISION OF BANKS, TAX, TRADE FINANCE, TRADING, UNION, URBAN AREAS, URBANIZATION, WAGES,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110404090342 http://hdl.handle.net/10986/3387
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