Improving Banking Supervisory Mechanisms
In the OIC Member Countries
33
In order to evaluate the performance of the banking sector, it is important to analyze the
source of banking profitability. As can be seen in Figure 27, around 70% of the banking profits
are made from interest rates both from credits and securities. One third of the profit comes
from non-interest income such as commissions and other banking services. Gains from trading
are a very minor source of profitability in the OIC member states. This decomposition implies
that, majority of profits rely on interest bearing assets. Increasing the non-interest income in
the selected OIC member states can constitute a risk-diversifying strategy for the members.
Figure 27: Profitability
Source: Bankscope
Figure 28: Return on Equity
Source: IMF-FSI
In terms of bank profitability and equity return in OIC member states. Kazakhstan shows a
significant volatility in bank profitability and return on equity. Overall, ROE and ROA measures
are rather satisfactory compared to US and European banking industries.
Net Interest
Income
67%
Net Gains on
Trad. and Der.
3%
Non-Interest
Operating
Income
30%
Profitability of the Banking Sector
(for Selected OIC Members)
-100
-80
-60
-40
-20
0
20
40
Turkey Malaysia Saudi Arabia UAE Pakistan Indonesia Kazakhistan
Bank Return on Equity