Saudi Journal of Economics and Finance (SJEF)
Volume-3 | Issue-10 | 466-471
Original Research Article
Evaluating the Financial Soundness of Kuwaiti Banking Sub-Sectors Using EAGLES Financial Model: A Comparison Study between Islamic and Conventional Banks
Musaed S. AlAli
Published : Oct. 21, 2019
Abstract
After the Asian financial crisis in 1997, CAMELS model for evaluating banks financial soundness became questionable since the model was unable to predict the financial collapse of Asian banks. As a result, new models of evaluating the financial soundness of banks were developed. One of these models was the EAGLES model that showed to be a worthy model to consider. The model examines six areas that mostly affects the financial soundness of banks. These areas are earning, assets quality, growth, liquidity, equity, and strategic responsiveness. This study aims to compare the financial soundness of Islamic and conventional banking sub-sectors in Kuwait over the period 2011-2018. Results shows that conventional banks outperformed Islamic banks in all areas except in the growth side. The results obtained from the trend analysis revealed that Islamic banking sector is improving more rapidly in all areas, except in liquidity, and that can be explained by the fairly young age of Islamic banking and its position in the learning curve which is much steeper than conventional banking position which is somewhat flat.