The Balance between Liquidity and Profitability in Commercial Banks (Saudi Arabia)

Abstract

This study is aimed to measure and evaluate the profitability and liquidity of Saudi commercial banks. The subject of study is selected due to the increasing number of business transactions and development financing in the Saudi Arabian economy and the increasing variation and sophistication of bank services.The study is based on the secondary data which has been collected from balance sheet and income statements of banks, their websites, and related web pages of Saudi stock exchange (Tadawul) and Saudi Arabian Monetary Agency (SAMA) on the internet. Hypotheses testing finding exposed that there is no relationship between the total assets of bank and its profitability. Moreover, there is relationship between customer deposits and the amount of personal loan. Also, there is relationship between numbers of branches and banks liquidity (customer deposits).Based on the result above, researchers recommend Saudi banks to take the opportunity of enter the Islamic banking service. Bank who will take this opportunity will attract new customer which will generate attractive profit with reasonable level of risk. In addition, banks need to be more close to a customer by opening new branches in rural areas, small cities and populated areas. Furthermore, banks may simplify banking services for their customers.

Keywords: Liquidity, Profitability, Ratios, Tadawul, SAMA.