The Impact of Interest Expense and non- Interest Expense on Net Income Fluctuations: An analytical study on select UAE banks

Abstract

The banking sector in the UAE has enjoyed substantial growth since the establishment of the country. Currently there are 21 national banks and 28 foreign banks carrying various banking activities in the UAE and serving a population of approximately two million people. The UAE central bank is monitoring the financial sector and all commercial banks are regulated by the central bank. In the UAE, a well-structured network of local banks and branches of foreign banks provide a full range of commercial banking services. The main objective of the present study is that the interest income and the non – interest income’s impact on the net income with reference to interest rate changes during 2006 to 2010 in select UAE banks. Required data for the study has been collected from the officially published secondary sources like web sites, publication and annual reports. Data drawn from the sources have been processed through different models to infer the required results to reflect the objectives of the study. Since the present work is aimed to focus on the interest rate, interest and non-interest income and their impact on select UAE banks, the other factors are ignored. Relevant statistical methods are used to explain the data relating to the study wherever necessary. The set hypothesis for the study is that the non interest income’s impact on net income valuation is highly significant when compared to interest rate and interest income in select banks during the period of the study. The study is limited to select UAE banks and the findings and conclusions may be useful for the banks of this region in general and the UAE banks in specific.