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Citation: Shah, Sayyed Sadaqat
Hussain, S
,tefan Cristian Gherghina,
Rui Miguel Dantas, Saliha Rafaqat,
Anabela Batista Correia, and Mário
Nuno Mata. 2023. The Impact of
COVID-19 Pandemic on Islamic and
Conventional Banks’ Profitability.
Economies 11: 104. https://doi.org/
10.3390/economies11040104
Academic Editor: Angela Roman
Received: 9 February 2023
Revised: 11 March 2023
Accepted: 16 March 2023
Published: 24 March 2023
Copyright: © 2023 by the authors.
Licensee MDPI, Basel, Switzerland.
This article is an open access article
distributed under the terms and
conditions of the Creative Commons
Attribution (CC BY) license (https://
creativecommons.org/licenses/by/
4.0/).
economies
Article
The Impact of COVID-19 Pandemic on Islamic and
Conventional Banks’ Profitability
Sayyed Sadaqat Hussain Shah 1, S
,tefan Cristian Gherghina 2, * , Rui Miguel Dantas 3, Saliha Rafaqat 1,
Anabela Batista Correia 3and Mário Nuno Mata 3,4
1Department of Commerce and Finance, Government College, University Lahore, Lahore 54000, Pakistan
2Department of Finance, Bucharest University of Economic Studies, 6 Piata Romana,
010374 Bucharest, Romania
3ISCAL-Instituto Superior de Contabilidade e Administração de Lisboa, Instituto Politécnico de Lisboa,
Avenida Miguel Bombarda 20, 1069-035 Lisbon, Portugal
4Business Research Unit (BRU-IUL), Instituto Universitário de Lisboa (ISCTEIUL), 1649-026 Lisbon, Portugal
*Correspondence: stefan.gherghina@fin.ase.ro
Abstract:
The banking sector has a significant impact on a nation’s financial stability and economic
development. As one of the fundamental components of the financial sector, banks offer services that
are essential for the expansion of the markets. The stability of the financial system is significantly
impacted by the efficiency of the banking sector. COVID-19 has had a tremendous effect on the
economy. This pandemic cannot be disregarded, considering how widespread it has been and
how many people it has affected globally. Both society and the global economy have undergone
profound change. Hence, it is critical to ascertain how severely the outbreak has impacted the banking
system. To assess the potential impact of pandemic, the current study examined conventional and
Islamic banking. This study also investigates how COVID-19’s moderating effect influences the
banking system. Financial statements from 10 conventional banks and 5 Islamic banks in Pakistan
are the sources of this study’s sample data. COVID-19 is a moderator in this study. The empirical
estimations by means of the fixed-effects approach suggests that the moderator has a large impact
on bank profitability. In addition, COVID-19 appears to have a stronger influence on the Islamic
banking system.
Keywords: COVID-19; Islamic vs. conventional; bank profitability; fixed-effects estimation
1. Introduction
The banking sector plays an important role in the economic growth and financial
stability of countries. Banks are one of the pillars of the financial ecosystem, which provide
services that are vital to the foundation of the financial markets. The profitability of the
banking sector plays an overly aggressive role in determining the soundness of the banking
system. In that respect, the profitability hence becomes a key success factor for booming
economies, which is the reason why profitability of the banking sector is so important
(Anbar and Alper 2011).
There are two types of banking sectors: one is Riba-free, called Islamic, and the other
one is interest-based, known as conventional banking. Both of these banking systems create
competition to satisfy their customers’ needs and expectations. Islamic and conventional
banking each play a major role for the economy, and these are differentiated based on Riba,
risk sharing, profit sharing practices and on their goals. The first Islamic bank was intro-
duced in Malaysia in 1983 (Ramlan and Adnan 2016). Islamic finance basically provides
financial services and products according to the tenets of Shariah. Islamic financing is
increasing day by day, especially in Muslim countries (Hussain et al. 2016).
The basic reason for Islamic financing is to satisfy the teachings of the Holy Quran and
Sunnah of the cherished Prophet Muhammad (P.B.U.H.), and charging additional money
Economies 2023,11, 104. https://doi.org/10.3390/economies11040104 https://www.mdpi.com/journal/economies
Economies 2023,11, 104 2 of 17
and accumulating extra profit is strictly prohibited in Islam. According to Shariah and
Islamic Common Law, contracts in the context of Riba and Speculation (Gharar) are not
allowed. In Islam, carrying balances on credit cards are strictly prohibited, and putting
money in fixed-income securities is also not allowed. This includes T-bonds and T-bills
or any other product containing a fixed return. Islam does not allow fixed returns. Profit-
Loss-Sharing is the concept of Islam. Investors following the Islamic financial system profit
when there is a profit, and bear loss when there is a misfortune. Basically, the Islamic
financial system is much like the Western Financial system, but it is exactly according to
the teaching of Holy Quran and Sunnah, and is still developing and being refined more
day by day. Speculators usually are given fair and fixed rates of return, which is strictly
prohibited in Islam. The concepts of interest, extra profit and fixed returns differentiate
Islamic financing from the conventional financing system. During the last twenty years,
there was a very large-scale development of Islamic financing in financial markets and
Islamic banking around the world in almost all Muslim countries. Over the past few years
Islamic banking has been growing rapidly (Hussain et al. 2016).
The COVID-19 pandemic has badly hit the economy of the world. The banking sector
also faced challenges due to this pandemic. This virus has not only affected the banking
sector, but also the stock markets. The expected default rate is rising due to the uncertainty
of health and lockdowns. The banking sector then faces a liquidity problem because of
the mismatch of demand and supply (Obeidat et al. 2021). In this pandemic, customers
and governments withdraw from banks to support the economy, while borrowers are
not returning funds to banks which causes a major reduction in deposits. To deal with
this liquidity problem, the central banks announced support to the banking sector by
lowering reserve requirements, regulatory capital and buying bonds/sukuks.
COVID-19
has had a great impact on conventional and non-conventional banks’ profitability. Since
COVID-19 the credit environment of banking has deteriorated, and it is expected that
some considerable time will be required to recover credit ratings back to
pre-COVID-19
levels (Obeidat et al. 2021). Market stock investors assessed that Islamic banks were not
superior to conventional banks during the COVID-19 pandemic. There was a negative
impact on stock returns of both banks due to COVID-19 and social distancing policies.
Banks with higher operating cost suffered more. Islamic banks are not always immune
to shock, as they have higher operating costs than conventional banks. So, there was an
adverse impact on Islamic banks compared to conventional ones (Ashraf et al. 2022). It
has been found that Islamic Banks (Ibs) enjoy distinctive methods of carrying out bank
intermediation functions. Islamic banks have been demonstrated to have resilience in
enduring the negative effects of economic crises, and in comparison to conventional banks,
are claimed to be better equipped to safeguard their profitability during times of crisis. As
a result, they can produce shareholder value in the form of higher stock returns. According
to the empirical findings, which were based on the data of 426 banks from 48 nations,
during the COVID-19 epidemic, Ibs’ stock returns were roughly 10–13 percent greater than
those of their conventional equivalents. This is after adjusting for a wide range of pre-crisis
bank-level and country-level characteristics, such as the state of each bank’s health and
risk-taking culture (Mirzaei et al. 2022).
According to the author’s knowledge there is little literature that investigates the
comparison of Islamic and non-Islamic profitability with the moderating role of
COVID-19
in Pakistan. This study will evaluate the success of Islamic banking as compared to
conventional, as Islamic banking is now quite an old concept, and with the passage of
time it is growing continuously. Islamic banking is not only growing in Muslim countries
but also in non-Muslim countries. Conventional banks have also started using the Islamic
window concept, by which they are attracting more banking customers. The novelty of this
research will be useful and beneficial for the investors, policymakers, customers, managers,
bankers, financial institutions and financial analysts’ decision making. It will help top
management and the public in making decisions. The results of this research will be helpful
to understand the moderating role of COVID-19 on Islamic and conventional banking.
Economies 2023,11, 104 3 of 17
This research is organized around Pakistan’s emerging market, which has a bank-based
economy. It is formed of Pakistan’s financial institutions, which constitute an important
part of the country’s economy (Sultan and Siddique 2010).
The structure of this paper is as follows. Section 2discusses prior literature and
formulate the research hypotheses. Section 3describes the sample and data, as well as
the empirical framework. Section 4shows the empirical results. Section 5performs the
robustness checks. Section 6is focused on quantitative outcomes’ discussion. Last section
concludes the paper.
2. Literature Review
During the COVID-19 pandemic, Islamic banks are more flexible as compared to
conventional banks because of profit sharing system. This system dominates transactions
under these challenging conditions. Table 1summarizes the differences between Islamic
and conventional banking systems.
Table 1. Differences between Islamic and conventional banking systems.
Islamic System Conventional System
Banking practices and all elements involved are and must be
Shariah compliant and free from prohibited activities such as
Riba (interest), Gharar (uncertainty) and Maysir (gambling)
Conventional bank practices do not have to be Shariah
compliance and they include the elements such as Riba
(interest), Maysir (gambling) and other prohibited activities in
their transactions (Jaffar and Manarvi 2011)
Real assets (having their own intrinsic value) are involved and
used as products Money is used as a product and is the base of earning
There is no concept of the time value of money and profit is
earned through trading of goods and services. It is asset-backed
financing where there always an asset involved and no concept
of money (Awan 2009)
This works on the principle of the time value of money and
interest is earned on money/capital
Loss is shared among banks and the organization/individual
when they incur any loss
Loss is not shared and the organization/individual has to pay
the interest even if it incurs any loss (Arslan et al. 2020)
A balanced budget is maintained as no more money is created
(issuing bonds or printing new notes for deficit)
Transactions are not backed by real assets, thus resulting in
deficit financing in money markets
Inflation is controlled because no money expansion takes place
due to the involvement of goods and services
Inflation is created while disbursing funds as the transactions
are not backed by real assets, i.e., goods and services, thus
resulting in the expansion of money
Different Islamic products are Mudaraba, ijara, takaful, Hawala,
Musawma, sukuk and Mushakarak. In delaying payment or in
default, customers have to contribute in charity funds (Sultan
and Siddique 2010)
Different conventional banking products are credit cards,
interest-based loans, bonds, insurance, car loans and short- and
long-term loans. In delaying payment of loans interest will be
charged (Jaffar and Manarvi 2011)
As the inflation is much controlled and in check in the Islamic
financial system, no extra burden or amount is charged by the
entrepreneurs
Due to inflation, entrepreneurs incorporate the inflationary
effect into the cost of their goods and services and in result
increase the prices of their goods and services available in the
economy
However, this pandemic has still hit the profitability of Islamic banking, but the role
of Islamic fintech will improve in the post-COVID-19 era (Rabbani et al. 2020). Bashir
(2003) examined the profitability of Islamic banks in the Middle East in 1993 and 1998, and
stated that the profitability is positively related to equity and macroeconomic variables
such as GDP; inflation also impacts profitability. Islamic financing is increasing day by
day, especially in Muslim countries (Hussain et al. 2016). According to Shariah and Islamic
Common Law, contracts in the context of Riba and Speculation (Gharar) are not allowed.
During the last twenty years, there has been a very large-scale development of Islamic
financing in financial markets and Islamic banking around the world in almost all Muslim
countries (Hussain et al. 2016). According to Fakhri and Darmawan (2021), Islamic banking
Economies 2023,11, 104 4 of 17
in Indonesia is more vulnerable compared to conventional banking, but COVID-19 also in-
fluences the operating expenses affecting the revenue of conventional banking. In Pakistan,
growth of Islamic banking has been slow, but in recent years it started increasing as almost
all other conventional banks opened an Islamic banking window because of the increasing
trend of Islamic banks internationally. Some of the problems that Islamic banking is facing
include the liquidity problem, lack of knowledge and well-trained human resources, fewer
products compared to conventional banking, and a slow growth rate; still, the popularity
of Islamic banking is increasing day by day.
According to Ashraf (2022), who conducted a study to compare Shariah- vs. non-
Shariah-compliant equities during COVID-19, Shariah-complaint stocks performed bet-
ter than non-Shariah-compliant ones. Furthermore, it was observed that during the
COVID-19 pandemic, confirmed cases and government responses were milder for Shariah-
compliant companies. Muslim investors were more inclined towards religious beliefs in the
COVID-19 crisis. Ali et al. (2022) analyzed the impact of the COVID-19 pandemic on Islamic
and non-Islamic stock indexes in Pakistan. The study showed that during the pandemic,
stock indexes of both Islamic and conventional natures behaved in almost same way. This
global emergency made investors risk-averse and trading activity worsen. Although the
concepts of both stocks are different, investors were concerned for profit maximization
and preferred to invest funds on their objective rather than on conceptual differences.
Sundarasen et al. (2022) examined the market volatility of Shariah and non-Shariah indexes
in the ASEAN and GCC regions. The market volatility of ASEAN countries was higher
than GCC countries during the COVID-19 pandemic because markets in ASEAN countries
were more affected than Middle Eastern countries. The Shariah indexes are more volatile
than non-Shariah ones in ASEAN countries because of a lack of portfolio diversification
due to Shariah’s strict procedures.
Dao and Nguyen (2020) investigated the factors influencing commercial bank prof-
itability in Asian developing countries such as Vietnam, Malaysia, and Thailand, from
2012 to 2016, and found that all entities had a negative association between operational risk
and banking profitability. Rwechungura et al. (2020) examined the connection between
bank profitability and stability in Tanzania from 2006 to 2015 and concluded that large
banks were more profitable than small banks. Katusiime (2021) explored the effects of
the COVID-19 pandemic on banking sector profitability in Uganda and showed that the
outbreak has a significant adverse impact on banking profitability only in the long run.
Similar to the financial crisis of 2007–2009, the COVID-19 crisis initially affected all
banks. It negatively affected the rating and funding conditions of banks, especially with
low profitability (Aldasoro et al. 2020). The COVID-19 pandemic has had more adverse
effects on the banking sector as compared to corporate due to national lockdowns and
social distancing measures. Banks with lower liquidity and profitability were much more
affected. In this crisis, central banks facilitated banks by providing policies regarding
greater liquidity and the flow of credit (Demirgüç-Kunt et al. 2021). This pandemic affected
almost all countries because of rapid transmission of the virus, which has great impacts on
the economic system. However, this pandemic also created several different opportunities
such as online banking, online meeting, food delivery services and all other online stores,
which gained more in this period. Banks are a major and important pillar of the economy,
and they facilitate in trade, credit facilities and support other businesses by providing loans.
However, this pandemic affected the banking industry as well and put this sector under
stress around the world (Darjana et al. 2022).
Islamic banking faced many challenges during this pandemic. A minimum number
of customers were allowed during MCO. The Central bank of Malaysia reduced the BLR,
which affects a country’s inflation and leads to lower interest rates, which then causes
problems for banks because a low return rate will decrease deposits (Anwar et al. 2020).
Fajri et al. (2022) showed that during COVID-19, the profitability of Islamic banking was
negatively related with this pandemic in the long run. The result showed that the decrease
in interest rates and nonperforming finance was associated with the increase in return
Economies 2023,11, 104 5 of 17
on assets. The banking sector in Kuwait has taken steps to protect different sectors from
pandemic effects by lowering interest rates because oil prices were decreasing due to the
impact of COVID-19 (Almutairi 2022). Kuwaiti banks provided services such as clearing,
settlement and payments through the internet and electronic media to facilitate customers
during this period. According to Almutairi (2022), the debt and leverage ratio increased
after COVID-19 but return on asset, equity and investment decreased after COVID-19.
During the first quarter of COVID-19, the U.S bank experienced a huge deposit flow
from USD 13 trillion to USD 15 trillion in April 2020 (Levine et al. 2021). There was
rapid growth in deposits and saving rates in U.S banks during this pandemic. As the
economy was disturbed, households boosted their savings keeping in view the pandemic
and economic uncertainty, thus they started saving their income. There was positive
relation between COVID-19 and bank deposits in the U.S. There was great uncertainty in
financial markets which prompted investors to save their money in bank deposits. This
pandemic created panic and anxiety among people, due to which they started worrying
about future, which surged their savings (Levine et al. 2021). Deposits are considered as
safe and low risk investments. Agnese and Vento (2020) stated that in terms of deposits,
the top four European countries, Germany, France, Italy and Spain, were stable and reliable
during this pandemic. There was no massive change in deposits from households and non-
financial corporations. Just like different sectors, investors also faced difficulty in making
investment decisions. Cryptocurrencies also faced much instability during COVID-19 as
there was an increase in the systematic risk. However, the results show that as Bitcoin is a
mature cryptocurrency, it was relatively less vulnerable and more stable than other ones
(Akhtaruzzaman et al. 2022).
According to the empirical findings, which were based on the data of 426 banks from
48 nations, during the COVID-19 pandemic, Ibs’ stock returns were roughly 10–13 percent
greater than those of their conventional equivalents (Mirzaei et al. 2022). According to
Fidya (2020), although Indonesia has a large population of Muslims of almost 87% of
their total population, they have only 10.5% of their total accounts in Islamic banks. Some
of the factors for this are product information dissemination, product knowledge and
profit margin factor. These different factors have a great impact on customers in choosing
products offered by Islamic or conventional banks which directly affect banking profitability.
Saleem and Ashfaque (2020) compared the profitability of Islamic banks between Malaysia
and Pakistan, which showed that some factors such as size of bank, asset quality, liquidity
and efficiency have an impact on the profitability of both countries in the same manner.
However, in Pakistan leverage and asset quality are not good predictors of profitability
because it is in the developing phase of Islamic banking. Bank size has a positive impact
on the profitability of banks in both countries, but management of Pakistani Islamic banks
should focus on the asset quality. Banks should be aware and provide relevant knowledge
to their customers whether individual or corporate to use their Islamic products. Zarrouk
et al. (2016) states that Islamic banks earns higher profits through non-financial activities.
Islamic banking performs better with higher GDP and investment but performance is
negatively related to the inflation rate.
Jaara et al. (2021) stated that Islamic banks are less efficient than conventional banking
in profitability level. Researchers revealed that bank size, capital ratio, GDP growth
and inflation influence 85% of conventional bank profitability and 89% on Islamic bank
profitability. When inflation rate increases, buying power decreases, which will directly
affect bank loans to investors and will reflect on the profitability of Islamic banks. Network
theory was used to examine the market power and competitive environment of banks
during the global financial crisis. The result indicated that during and after the global
financial crisis there was a lower level of competition. Therefore, banks disbursed loans
to customers without proper screening, which led to accumulation of NPAs. Regulators
should regulate the high credit sold off to their customers, especially during crisis (Rahman
and Misra 2021).
Economies 2023,11, 104 6 of 17
In the 1970s, Kahneman and Tversky (2013) explained the emotional and psychological
aspects of customers in decision making. Prospect theory states that humans weigh loss
more than gain as loss causes a more significant impact than gain and customers make
decisions to pursue perceived gain more than loss. This theory is based on the process of
decision making between different choices. It also explains the concept of loss aversion
that investors weigh loss more than the gain; this means any individual will feel the pain
of losing USD 200 as twice as the pleasure of gaining USD 200. Loss has a more emotional
significant impact than gain. As part of development of behavior finance, the Islamic
behavior finance gained light at the end of the 1980s to study the behavior (psychological
and religion) of investors and customers towards their decision making in dealing with
Islamic finance, Islamic banking and products (Kahneman and Tversky 2013). The theory
of bank size was developed by (Krasa and Villamil 1992), which explains the importance
of bank size to determine profitability in presence of risk. Stefan and Anne further stated
that cost and risk are both important determinants of bank size. The theory also states that
even bank portfolios are subjected to non-diversifiable macro risk, which improves default
probability and increases monitoring cost. A higher monitoring cost leads to a decline in
the profitability of banks. Conventional and Islamic banking have different bank sizes,
which differently impact the profitability of banks (Rashid and Ilyas 2018).
According to the review of literature, various variables exhibit distinct effects. Con-
ventional banking has more experience than Islamic banking, so it is more stable when
compared with Islamic banking. The profitability of conventional banks is higher than
Islamic, but Islamic banking is less risky than conventional (Matar 2017). Average prof-
itability of Islamic banking in 2008 and 2009 was better in all countries as compared to
2007 except Qatar, UAE and Bahrain. In Saudi Arabia, Turkey, Bahrain offshore and Jordan,
the Islamic banking profitability was significant. The banking sector in these countries
represent 52% and Islamic banking in these countries represent 37% of assets in the sample.
Islamic banking in UAE and Qatar is worse than conventional, and an aggregate test for
the sample showed that the impact of crisis on profitability of both groups (Islamic and
conventional) was insignificant (Hasan and Dridi 2010).
Islamic products are more complicated than conventional because of restrictions, and
how they involve more than one concept. According to Hasan and Dridi (2010), Islamic
banks are subject to different effects during crisis. Initially, profitability of Islamic banks was
limited, but after some time Islamic banks in some countries faced big losses as compared
to conventional. In 2005–2007, Islamic banks had higher returns on assets but after this
crisis their profitability largely declined.
During crisis, asset growth and credit were higher than in conventional banking
because of its growing market share and lending to a less-affected consumer sector helped
to support asset and credit growth. In the 2008–2009 crisis, larger Islamic banks performed
better compared to small ones because of better diversification and strong reputations.
This can be improved by developing the industry and increasing competition through
establishing well-managed and large Islamic banks that can perform and compete better
than existing ones. This global crisis gave an opportunity to Islamic banking to prove
themselves and also highlighted the need to address and overcome different important
challenges (Hasan and Dridi 2010).
Based on the discussion of prior literature, the below-mentioned hypotheses are de-
vised. In addition, the statistical significance of the estimated coefficients will be examined
using a t-test. Only when the test statistic falls in the critical region (i.e., has a value greater
than the critical value), the null hypothesis is rejected. As well, the p-value is used to
determine if the null hypothesis is disregarded or confirmed (not rejected). If the p-value is
less than the specified significance level (i.e., 1%, 5%, 10%), the null hypothesis is rejected;
alternatively, it is not.
H1. Bank size has a positive impact on profitability with the exogenous shock of COVID-19.
Economies 2023,11, 104 7 of 17
H2.
Operating efficiency with the moderation of COVID-19 has a negative impact on banks’ return
on assets.
H3. Interaction of COVID-19 with bank deposits have a positive impact on profitability of banks.
3. Research Methodology
In order to analyze and comparing Islamic and conventional banks in Pakistan, we
approach a quantitative study in which secondary data are used for analysis.
3.1. Sample Selection
The sample consisted of 10 conventional banks and 5 Islamic banks in Pakistan. The
sample consisted of Pakistani banks because after this pandemic no proper research was
performed on the moderating role of COVID-19. As the pandemic is a part of this world, it
is very important to consider this factor, which might help banks to tackle the condition
in the future. All these banks are Pakistan-controlled banks and data were obtained from
published financial balance sheets and income statements in annual reports of these banks.
In this analysis, the sample conventional banks are Habib bank, United bank, Allied bank,
National bank of Pakistan, Bank of Punjab, Soneri bank, MCB, Bank Alfalah, Askari bank,
Bank Al Habib and the Islamic sample banks are Meezan bank, BankIslami, Bank AlBaraka,
Dubai Islamic bank and MIB. A total of 15 banks were taken as the sample because their
financial statements provide clear, complete and accurate information. Five Islamic banks
were included as they are fully pure Islamic banks. Other banks were not included because
they had incomplete financial information, or they were not purely Islamic as they have
Islamic windows only.
3.2. Data Description
Data were collected on a quarterly basis from the financial statements of banks from
2016 to 2021. They were divided into two parts: before and during COVID-19. COVID-
19 is used as a moderator. From 2016 to 2018 the value of COVID-19 is considered 0 and
during COVID-19 it is assigned 1. Return on assets will be used as proxy to measure the
profitability of banks in comparison with independent variables of bank deposits, operating
efficiency and liquidity; however, bank size will also be a control variable. A dummy
variable is used to examine the effect of the recent COVID-19 outbreak on the Pakistan
banking profitability. Descriptive statistics and charts were used to analyze the comparison
of Islamic and conventional banking. Stata software was used, and regression analysis was
applied on this study’s results.
Detailed explanations of the variables are mentioned in below Table 2.
Regression analysis is used in this study for testing the relationship between variables.
Its purpose is to estimate the effect of different independent variables on a dependent
variable. A multiple regression model is used for the comparison of profitability of Islamic
and conventional banking in Pakistan with the moderating role of COVID-19. In this model,
return on assets is the dependent variable, which is used as a proxy for the measurement of
profitability of banks. Bank deposit, size and operating efficiency are independent variables
and COVID-19 is a moderating variable.
For assessing the relation as indicated in H1, Equation (1) is designed:
Return on assets =α+β1Bank sizeit +β2Covid19it +β3(Bank size ∗Covid19)it +β4De positsit
+β5O perati ng e f f ici encyit +e(1)
In order to examine the association as specified in H2, Equation (2) is formed:
Return on assets =α+β1O perati ng e f f ici encyit +β2Covid19it +β3(O perat ing e f f ic iency ∗Covid19)it
+β4Depositsit +β5Bank sizeit +e(2)
With the purpose of investigating the link as formulated in H3, Equation (3) is devised:
Economies 2023,11, 104 8 of 17
Return on assets =α+β1Depositsit +β2Covid19it +β3(Deposits ∗Covid19)it +β4Banksizeit
+β5O perati ng e f f ici encyit +e(3)
Table 2. Variable definitions and measurement.
Variables Definitions Measurement Abbreviation Prior Studies
Dependent variables
Profitability (Return on
assets)
Return on Asset is used to assess the
profitability of a firm and to analyze its
future outlook in terms of revenues and
growth
Regression analysis is used to
measure the relationship of ROA,
a dependent variable with other
independent variables
ROA =N ET IN COME
TOTAL AS SETS
ROA Jaara et al. (2021)
Independent variables
Bank deposit
Bank deposits are the main funding of the
banks, they are deposited by customers. It
is a liability of banks but plays a major role
in profitability of banks. Banks that have
fewer investment avenues will try to
improve their deposit base in order to earn
revenues
BA NK DE POSITS =
TOTAL D EPOSI TS
TOTAL AS SETS
Dp Al-Homaidi et al.
(2020)
Bank size
Bank size defines the market share of each
bank in the market or certain economy. A
bank with large size reduces its cost because
of economies of scale
BA NK SIZE =
LOG OF TOTAL ASS ETS Log A Ramlan and Adnan
(2016)
Operating efficiency
Operating efficiency is the ratio of bank’s
operating expenses to total assets. It
indicates the bank management’s efficiency
in spending every unit for generating
revenues
OPE RAT IN G EF FI CI ECNY
=TOTAL O PERAT IN G EXP ENSE
TOTAL AS SETS
OPEF Al-Homaidi et al.
(2020)
COVID-19 (moderating
variable)
This is the moderating variable that takes
1 value during COVID-19 from 2019 to 2021,
otherwise it has a 0 value before
COVID-19 from 2016 to 2018
1 = during COVID-19
0 = before COVID-19 Cov Jin et al. (2021)
The
α
represents the constant term.
β1
,
β2
,
β3
,
β4
represents the parameter of change
and
e
relates to the error term that satisfies the equation. ROA is used to calculate the
bank’s profitability. Operating efficiency is the dependent discrete variable. Bank deposit
and size are also dependent variables. Bank size is the log of total assets. COVID-19 is the
moderator which will check the impact on Islamic and conventional banks. In
Equation (1)
,
Moderator1 is the multiplication of COVID-19 and bank deposits. In Equation (2), Mod-
erator2 is the multiplication between COVID-19 and operating efficiency. In
Equation (3)
,
Moderator3 is the multiplication of COVID-19 and bank size.
4. Empirical Results
Stata software was used to examine the validity of the formulated hypotheses and
the panel data regression model tested the relationship between return on assets and the
independent variables of Islamic and conventional banks in this study. In this regression
model Pooled OLS was used, and this model was estimated by ignoring time series’ and
cross-sectional data’s natures and supposing that all entities are equal in the overall time
period. This model used their values of intercept which do not change over time. The
Hausman test was used to select the appropriate method for estimation. The result of
Hausman test indicates that in this study the fixed-effect model will be applied as its p
value is 0.007, which is less than 5% (p-value = 0.007 < 0.05).
Table 3shows the regression analysis of Islamic and conventional banks without the
moderator. It indicates that there is positive and significant relationship of bank size on
both Islamic and conventional banks’ return on assets on the level of 1%. It explains that
when the size of the bank is larger, then profitability (return on assets) of both types of
banks will also increase. Islamic bank size has more impact on profitability as compared to
conventional banking.
Economies 2023,11, 104 9 of 17
Table 3. Regression analysis of conventional vs. Islamic banking systems without moderator.
Variables
(1) (2)
ROA ROA
Conventional Islamic
BANKSIZE 0.0126 *** 0.0231 ***
(4.661) (5.243)
OPERATINGEFFICIENCY −0.187 ** −0.272 ***
(−2.426) (−3.443)
DEPOSITS 0.00119 −0.00319 *
(0.871) (−1.824)
CONSTANT −0.00858 *** −0.0131 ***
(−3.112) (−3.787)
Observations 240 120
R-squared 0.393 0.526
r2_a 0.3852 0.514
t-statistics in parentheses. *** p< 0.01, ** p< 0.05, * p< 0.1.
The findings show that operating efficiency of Islamic and conventional banks are both
significant at the level of 5%, but negatively associated with return on assets. This means
that when operating efficiency increases then profitability of both banks will decrease,
similar to the findings of Al-Homaidi et al. (2020). The deposit of conventional banks
without the moderator is positively associated with profitability, but the deposit of Islamic
banks is negatively associated with return on assets. This illustrates that when the deposits
increase in conventional banks it will increase its profitability, but when the deposit is
increasing in Islamic banks it deceases profitability. The R-square value defines how much
the dependent variable is described by independent variables in percentage. The R-square
value of this pool regression of conventional banks shows that the independent variable
contributes to 39% of the variation in ROA, whereas the independent variable of Islamic
banks has an impact of 52% on ROA which is better than conventional.
Table 4indicates the regression analysis of conventional and Islamic banking with
Moderator1. The moderator is used to see whether the bank size has a positive or negative
impact on profitability due to the COVID-19 pandemic. The results of bank size of both
conventional and Islamic are positive and statistically significant at the 1% level, which
indicates that larger bank size has a higher impact on profitability of banks.
Islamic banks have a larger value as compared to conventional banks on ROA. Conven-
tional bank size has a positive and significant relationship with profitability, which means
that with a 1% increase in bank size, the profitability of conventional banking will increase
by 2.0%. However, without the moderator it increases by 1.2% and regarding Islamic
bank size, the profitability will increase by 2.7%. Operating efficiency has a negative but
significant impact on ROA of Islamic and conventional banking. This means that manage-
ment of bank is efficiently controlling its operational expenses. The negative relationship
shows that a decrease in operating efficiency will increase the value of profitability (ROA);
these results are supported by Masood and Ashraf (2012) and Masood et al. (2015). Bank
deposits show a positive relationship with ROA in conventional banking but in Islamic
this is negative and not statistically significant on profitability. Deposits are basically the
liability of banks which they have to return back to their customers/clients, so the findings
show a negative impact where with the increase in deposits the profitability of Islamic
bank decreases. Moderator1 has a significant impact on Islamic banking as compared
to conventional. The R-square value explains how much percentage of the dependent
variables’ ROA is explained by the independent variable. In this assessment, the R-square
with Moderator1 of conventional banks is 41%, but in Islamic banking the R-square is
better than conventional at 60.5%. Based on these results, H1 will be accepted, and the null
hypothesis will be rejected because the results show that there is a significant relationship
for bank size and profitability with the moderating role of COVID-19.
Economies 2023,11, 104 10 of 17
Table 4.
Regression analysis of conventional vs. Islamic banking systems (bank size with moderator).
Variables
(1) (2)
ROA ROA
Conventional Islamic
BANKSIZE 0.0204 *** 0.0269 ***
(6.898) (2.975)
OPERATINGEFFICIENCY −0.251 *** −0.323 ***
(−3.465) (−3.604)
DEPOSITS 0.00824 −0.00269
(0.648) (−1.477)
COVID-19 0.00177 −0.0106 **
(0.322) (−2.123)
MODERATOR1 0.00695 * 0.0125 **
(1.226) (2.132)
CONSTANT −0.0129 *** −0.0115 ***
(−5.011) (−2.919)
Observations 240 120
R-squared 0.417 0.605
r2_a 0.317 0.489
t-statistics in parentheses. *** p< 0.01, ** p< 0.05, * p< 0.1.
Table 5indicates the comparison of conventional and Islamic banking with Moderator2.
Moderator2 is the multiplication of operating efficiency and COVID-19 to check the positive
or negative impact of the pandemic on profitability. It shows that Moderator2 has a negative
but significant impact on profitability of Islamic banking with a 1% level of significance
as compared to conventional banking. Operating efficiency tells us how efficiently bank
management is able to control expenses. When they utilize their expenses efficiently it will
directly increase their profitability.
Table 5.
Regression analysis of conventional vs. Islamic banking systems (operating efficiency with
moderator).
Variables
(1) (2)
ROA ROA
Conventional Islamic
BANKSIZE 0.0188 *** 0.0204 ***
(7.312) (4.082)
OPERATINGEFFICIENCY −0.204 ** −0.252 ***
(−2.223) (−2.723)
DEPOSITS 0.000654 −0.00346 *
(0.517) (−1.971)
COVID-19 0.000458 0.00183 *
(0.537) (1.780)
MODERATOR2 −0.151 −0.326 **
(−1.068) (−2.488)
CONSTANT −0.0134 *** −0.00996 **
(−5.203) (−2.500)
Observations 240 120
R-squared 0.416 0.612
r2_a 0.316 0.498
t-statistics in parentheses. *** p< 0.01, ** p< 0.05, * p< 0.1.
There is negative relationship between operating efficiency and profitability as sup-
ported by previous studies (Hussien et al. 2019). With a 1% increase in operating efficiency,
conventional profitability will decrease by 20.4% and Islamic profitability will decrease by
Economies 2023,11, 104 11 of 17
25.2%. COVID-19 is impacting both types of banking, but is more significant on Islamic
banking. The R2 of Islamic banking is 0.612 which indicates that 61.2% of the change in
ROA is due to the change in the independent variable; in conventional banking 41.6%
of the change in the dependent variable is explained by independent variables, and the
remaining 59% may be due to other factors which are not included. Therefore, H2 will be
accepted because there is a negative and significant impact of operating efficiency with a
beta coefficient of
−
0.252 for Islamic and
−
0.204 for conventional banking on the return on
assets with the exogenous shock of COVID-19.
Table 6indicates the result of conventional and Islamic banking with Moderator3.
Moderator3 is the multiplication of COVID-19 and deposits which shows that Modera-
tor3 has no significant effect on the profitability of Islamic or conventional banking.
Table 6.
Regression analysis of conventional vs. Islamic banking systems (bank deposit with moderator).
Variables
(1) (2)
ROA ROA
Conventional Islamic
BANKSIZE 0.0183 *** 0.0228 ***
(7.069) (4.522)
OPERATINGEFFICIENCY −0.261 *** −0.316 ***
(−3.648) (−3.396)
DEPOSITS −0.00342 −0.00372 **
(−0.223) (−2.022)
COVID-19 −0.00334 −0.00259
(−1.584) (−0.652)
MODERATOR3 0.00311 0.000960
(1.144) (0.189)
CONSTANT −0.0129 *** −0.0124 ***
(−5.001) (−2.992)
Observations 240 120
R-squared 0.416 0.586
r2_a 0.316 0.464
t-statistics in parentheses. *** p< 0.01, ** p< 0.05. * p< 0.1.
During the COVID-19 pandemic, customer deposits did not affect much on both
types of banking. It had a minimal effect and Islamic banking lacks more in deposit; this
is supported by Ludeen and Masih (2017). Over the last few years Islamic banking has
been growing but still they are lacking in deposits compared to conventional banking
because interest is the main determinant for conventional banks to attract their customers
to deposit. They generate their profit by paying customers a lower rate and charging
a high rate to borrowers. Customers are confident that they are receiving a fixed rate
against their deposit in conventional banks but profit rates in Islamic banking vary so
customers are in doubt that they may be given a lower rate than in conventional banking.
Deposits are the liability of banks which customers can withdraw whenever they want
to (Ludeen and Masih 2017). In the COVID-19 pandemic, banks should design different
marketing programs to entice customers to deposit. According to Baicu et al. (2020), at
the start of pandemic, due to lockdown only a limited number of customers visited the
bank physically. One factor is also that large number of people lost their jobs and faced
financial difficulties during the pandemic (Ichsan et al. 2021). Almost 25.9% of customers
only visited bank once a month and 58% of customers did not visit the bank during the
pandemic. Furthermore, 92% of customers used ATMs for cash withdrawals and only
19% used them for deposits/transfers, which indicates that the customers’ trend towards
deposits was not significant during COVID-19. There was no significant impact on deposits;
due to the pandemic and economic conditions customers did not want to deposit because
of uncertainty and the financial crisis. Low- and middle-class people were more focused
on withdrawal rather than deposits (Ludeen and Masih 2017). Therefore, H3 will be
Economies 2023,11, 104 12 of 17
rejected because there was no significant impact of deposits on bank’s profitability with
COVID-19 interaction.
5. Robustness Checks
Robustness checks were performed to confirm the findings. The robustness analysis
was conducted on a yearly and on a quantile basis which shows similar results to that of
the fixed- effect model. The sample size is split into two parts; there are 240 observations
of conventional banks and 120 observations of Islamic banks. Firstly, the analysis was
performed on conventional bank data, which showed almost similar results of the impact
of bank size on the return on assets (profitability), which is positive and has the same 1%
level of significance. Operating efficiency also has similar results with the inverse relation
with profitability, but there is a difference in the significance level. It is 10%, but using the
fixed-effects model, the level of significance is 5%. Customer deposit in conventional banks
is insignificant in the fixed-effect model, as well as in robust analysis quarterly, which is
shown in below Table 7. In Islamic banking, there were 120 observations, and the analysis
was performed on a quarterly basis, which also shows similar results as the fixed-effect
model, except there is a minor change in significance level. The bank size is positive and
highly significant at 1%, but in robust analysis it is positive with a 5% level of significance
in quarter 2. Operating efficiency also has the inverse relation with profitability, but the
only change is in the level of significance which was 1% in fixed-effect modeling, but now
is 5%. Deposits had an insignificant impact on return on assets in the fixed-effect analysis
and also in robust analysis, which indicates similar results mentioned in Table 8below
(Paltrinieri et al. 2021).
Table 7. Quantile regression estimates for the conventional banking system.
Variables MODERATOR1 MODERATOR2 MODERATOR3
q25 q50 q75 q25 q50 q75 q25 q50 q75
BANKSIZE 0.0137 *** 0.0116 ** 0.0268 *** 0.0133 *** 0.0129 *** 0.025 *** 0.013 *** 0.0126 *** 0.0209 ***
(2.996) (2.259) (6.665) (6.011) (3.152) (6.537) (4.697) (3.267) (4.292)
OPERATINGEFFICIENCY −0.248 ** −0.217 * −0.152 −0.165 −0.107 −0.114 −0.248 *** −0.170 −0.155
(−2.386) (−1.899) (−1.237) (−1.199) (−0.993) (−0.974) (−2.771) (−1.620) (−1.157)
DEPOSITS 0.00258 ** 0.00130 −0.000885 0.00285 ** 0.00165 −0.000531 0.00258 −5.80 ×
10−6−0.00497
(2.173) (0.822) (−0.279) (1.977) (0.956) (−0.181) (1.125) (−0.00315) (−1.219)
COVID-19 −0.00126 −0.00792 0.00697 0.000243 0.000389 −0.000957 −0.000252 −0.00371 −0.00849 **
(−0.189) (−0.966) (0.489) (0.215) (0.366) (−0.630) (−0.0822) (−1.463) (−2.157)
MODERATOR1 8.93 ×10−50.000815 −0.000872
(0.121) (0.893) (−0.560)
MODERATOR2 −0.135 −0.184 0.0109
(−0.689) (−0.920) (0.0392)
MODERATOR3 −0.00026 0.00418 0.0102 *
(−0.0640) (1.242) (1.944)
CONSTANT −0.0108 ** −0.00746 −0.018 *** −0.011 *** −0.0095 ** −0.02 *** −0.01 *** −0.00765 * −0.0105
(−2.178) (−1.364) (−3.539) (−6.686) (−2.195) (−3.940) (−2.971) (−1.808) (−1.649)
Observations 240 240 240 240 240 240 240 240 240
t-statistics in parentheses. *** p< 0.01, ** p< 0.05, * p< 0.1.
Table 8. Quantile regression estimates for the Islamic banking system.
Variables MODERATOR1 MODERATOR2 MODERATOR3
q25 q50 q75 q25 q50 q75 q25 q50 q75
BANKSIZE 0.032 *** 0.013 ** 0.00287 0.032 *** 0.020 *** 0.018 ** 0.032 *** 0.018 ** 0.030 ***
(4.043) (2.613) (0.341) (5.455) (3.302) (2.086) (3.552) (2.439) (3.398)
OPERATINGEFFICIENCY 0 −0.302 ** −0.430 *** 0 −0.202 −0.247 −0.00896 −0.388 ** −0.247
(0) (−2.465) (−2.894) (0) (−1.114) (−1.348) (−0.0449) (−2.433) (−1.438)
DEPOSITS −0.00137 −0.0004 0.000464 −0.00137 −0.00148 −0.0070 −0.00158 −0.0023 −0.009 **
(−0.814) (−0.163) (0.100) (−1.139) (−0.461) (−1.447) (−0.925) (−0.709) (−2.129)
COVID-19 −0.00342 −0.01 ** −0.02 *** 0.000712 0.00221 * 0.004 ** −0.00058 −0.0031 −0.00532
(−0.392) (−2.433) (−4.688) (0.479) (1.768) (2.303) (−0.182) (−0.625) (−0.868)
Economies 2023,11, 104 13 of 17
Table 8. Cont.
Variables MODERATOR1 MODERATOR2 MODERATOR3
q25 q50 q75 q25 q50 q75 q25 q50 q75
MODERATOR1 0.000419 0.001 ** 0.002 ***
(0.398) (2.448) (4.662)
MODERATOR2 −0.0864 −0.275 * −0.5 ***
(−0.515) (−1.893) (−2.668)
MODERATOR3 0.000809 0.00392 0.00598
(0.193) (0.618) (0.782)
CONSTANT −0.02 *** −0.007 * 0.00272 −0.02 *** −0.013 ** −0.0053 −0.02 *** −0.0091 −0.013 **
(−3.009) (−1.759) (0.529) (−4.411) (−2.098) (−0.887) (−2.790) (−1.658) (−1.988)
Observations 120 120 120 120 120 120 120 120 120
t-statistics in parentheses. *** p< 0.01, ** p< 0.05, * p< 0.1.
6. Discussion
This study investigates the difference between conventional and Islamic banks with the
moderating role of COVID-19. A total of 360 observations are in this statistical description
which includes both Islamic and conventional banking. The results indicate that without
the moderator there is a positive and significant relationship of bank size in both Islamic
and conventional banks’ return on assets on the level of 1%. This explains that when the size
of the bank is larger, then profitability of both types of banks will also increase. However,
Islamic banks have a larger value of this influence compared to conventional banks on ROA.
Conventional bank size has positive and significant relationship with profitability, which
means that with a 1% increase in bank size the profitability of conventional banking will
increase by 2.0%. Without the moderator, it will increase by 1.2% and for Islamic bank size
the profitability will increase by 2.7%. The findings show that operating efficiency of both
Islamic and conventional banks are significant at the level of 5%, but negatively associated
with return on assets. This means that management of bank is efficiently controlling its
operational expenses. A negative relationship shows that a decrease in operating efficiency
will increase the value of profitability (ROA); these results are supported by Masood
and Ashraf (2012), Masood et al. (2015), and Al-Homaidi et al. (2020). The deposit of
conventional banks without the moderator is positively associated with profitability, but the
deposit of Islamic banks is negatively associated with return on assets. This illustrates that
when the deposits increase in conventional banks it will increase its profitability, but when
deposit is increasing in Islamic banks it deceases profitability. The R-square value of this
pool regression of conventional banking shows that the independent variable contributes
to 39% of the variation in ROA, whereas the independent variable of Islamic banks impact
52% of the ROA, which is better than in conventional banks.
Moderator1 has a significant impact on Islamic banking compared to conventional.
The R-square with Moderator1 of conventional banks is 41%, but in Islamic banking R-
square is better than conventional at 60.5%. Based on these results, H1 will be accepted,
and the null hypothesis will be rejected because the results show that there is a significant
relationship between bank size and profitability with the moderating role of COVID-19. It
further shows that Moderator2 has a negative but significant impact on the profitability
of Islamic banking with a 1% level of significance as compared to conventional banking.
Operating efficiency tells us how efficiency bank management is able to control expenses.
When they utilize their expenses efficiently banks will directly increase their profitability.
There is negative relationship between operating efficiency and profitability as supported
by previous studies (Hussien et al. 2019). With a 1% increase in operating efficiency,
conventional profitability will decrease by 20.4% and Islamic profitability will decrease by
25.2%. COVID-19 is impacting both types of banking, but is more significant on Islamic
banking. The R2 of Islamic banks is 0.612 which indicates that 61.2% of the change in ROA is
due to the change in the independent variable; in conventional banking, 41.6% of the change
in the dependent variable is explained by the independent variables, and the remaining 59%
may be due to other factors which are not included. Therefore, H2 will be accepted because
there is a negative and significant impact of operating efficiency with a beta coefficient
Economies 2023,11, 104 14 of 17
of
−
0.252 in Islamic and
−
0.204 in conventional banking on return on assets with the
exogenous shock of COVID-19. During the COVID-19 pandemic, customer deposits did
not affect much on both types of banking. It had minimal effects, and Islamic banking is
lacking more in deposits, as supported by Ludeen and Masih (2017). Over the last few
years, Islamic banking has been growing, but still it is lacking in deposits as compared to
conventional banking because interest is the main determinant for conventional banks to
attract their customers to deposit. They generate their profit by paying customers lower
rates and charging high rates to borrowers. Customers are confident that they are receiving
a fixed rate against their deposit in conventional banks but the profit rate in Islamic banking
varies, so customers are in doubt whether they will be given a lower rate than conventional
banks. The deposit is the liability of the bank, which customers can withdraw whenever
they want to (Ludeen and Masih 2017). In response to the COVID-19 pandemic, banks
should design different marketing programs to entice customers to deposit. According
to Baicu et al. (2020), at the start of pandemic, due to lockdown only limited number of
customers visited the bank physically. Another factor is that a large number of people
lost their jobs and faced financial difficulties during pandemic (Ichsan et al. 2021). Almost
25.9% of customers only visited banks once a month, and 58% of customers did not visit
bank during pandemic. A total of 92% of customers used ATMs for cash withdrawals
and only 19% used them for deposits/transfers, which indicates that the customer trend
towards depositing was not significant during COVID-19. There is no significant impact
on deposits due to the pandemic; economic conditions were such that customers did not
want to deposit because of uncertainty and the financial crisis. Low- and middle-class
people were more focused on withdrawal rather than deposits (Ludeen and Masih 2017).
Therefore, H3 will be rejected because there is no significant impact of deposits on bank
profitability with the COVID-19 interaction.
7. Concluding Remarks
In this study, the comparative analysis of conventional banking and Islamic bank-
ing profitability is assessed, and the sample of this research is taken from Islamic and
conventional banks of Pakistan with a moderating role of the COVID-19 outbreak. As
in recent years, the COVID-19 pandemic has played an important role which affected
different financial and nonfinancial sectors of the world. Despite several negative impacts
of COVID-19 on the economy, it also has had some positive effects, as it boosts online
banking, cardless shopping and branchless banking. With the improvement in technology,
online banking rapidly increased during COVID-19, which also impacted the profitability
of banking. So, it is important to see whether this pandemic has had a significant impact
on profitability of Islamic or conventional banking. COVID-19 was taken as a moderator
in this study and return on assets was used as a proxy to measure the profitability of
banks in comparison with independent variables of bank deposits, operating efficiency and
bank size. The data were collected from financial statements of 15 Pakistani banks which
consisted of 10 conventional banks and 5 Islamic banks. The growth of Islamic banking is
increasing day by day. Quantitative data were used, which covered 6 years from 2016 to
2021. There was a total of 360 observations. Firstly, Pooled OLS was used, and then after the
Hausman test, the result indicated that the fixed-effect model was more suitable compared
to random. Different issues such as heteroskedasticity and multicollinearity were not found
in these data. The findings showed that there were positive and significant relationships
with profitability, deposits and size, but negative relationships with the operating efficiency
of Islamic banks and conventional banks with the moderating role of COVID-19. There
were more significant results with Islamic banking. The moderating role of COVID-19 has
slightly affected conventional banking, but it is highly significant on bank size, operating
efficiency and profitability and insignificant on bank deposits. So, the result indicates that
Islamic banking is more affected by the external condition (COVID-19) than conventional
banking. Furthermore, with the moderating role of COVID-19, this indicates that during
Economies 2023,11, 104 15 of 17
the pandemic, customer trends or beliefs were more centered on Islamic banking compared
to conventional banking in Pakistan.
Researchers can conduct future studies on the comparison of banking profitability
with other developing nations which will help them. With the passage of time, the Islamic
banking sector is growing, so this will help future researchers to perform research on
different areas of Islamic banking. Future researchers can conduct their studies by taking
different pandemics or situations such as natural disasters (flood, dengue) as a moderator.
Islamic banking is increasing rapidly, so banks must try to increase their deposits as
well as manage their expenses in order to maximize their profitability, as this pandemic
affected different sectors of the Pakistan economy. Banking is a meaningful part of the
Pakistani financial system, hence it is essential to assess whether such outbreaks impair the
banking sector.
Author Contributions:
Conceptualization, S.S.H.S.,
S
,
.C.G., R.M.D., S.R., A.B.C. and M.N.M.; method-
ology, S.S.H.S.,
S
,
.C.G., R.M.D., S.R., A.B.C. and M.N.M.; software, S.S.H.S.,
S
,
.C.G., R.M.D., S.R., A.B.C.
and M.N.M.; validation, S.S.H.S.,
S
,
.C.G., R.M.D., S.R., A.B.C. and M.N.M.; formal analysis, S.S.H.S.,
S
,
.C.G., R.M.D., S.R., A.B.C. and M.N.M.; investigation, S.S.H.S.,
S
,
.C.G., R.M.D., S.R., A.B.C. and
M.N.M.; resources, S.S.H.S.,
S
,
.C.G., R.M.D., S.R., A.B.C. and M.N.M.; data curation, S.S.H.S.,
S
,
.C.G.,
R.M.D., S.R., A.B.C. and M.N.M.; writing—original draft preparation, S.S.H.S.,
S
,
.C.G., R.M.D., S.R.,
A.B.C. and M.N.M.; writing—review and editing, S.S.H.S.,
S
,
.C.G., R.M.D., S.R., A.B.C. and M.N.M.;
visualization, S.S.H.S.,
S
,
.C.G., R.M.D., S.R., A.B.C. and M.N.M.; supervision, S.S.H.S.,
S
,
.C.G., R.M.D.,
S.R., A.B.C. and M.N.M.; project administration, S.S.H.S.,
S
,
.C.G., R.M.D., S.R., A.B.C. and M.N.M.;
funding acquisition, S.S.H.S.,
S
,
.C.G., R.M.D., S.R., A.B.C. and M.N.M. All authors have read and
agreed to the published version of the manuscript.
Funding: This research received no external funding.
Data Availability Statement: Data are available upon reasonable request.
Acknowledgments:
The authors would like to thank the Editor, as well as the three anonymous
reviewers for all useful and helpful comments on the manuscript.
Conflicts of Interest: The authors declare no conflict of interest.
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