Author(s): Sayed abbas Ahmed, Safiat Ali Saber Ali
Financial markets generally and banks specially play very important role in the growth of the real economy by channeling funds from savers to borrowers. lending activity is the core business of commercial banks that contributes the largest income proportion to the banks. Therefore, this paper aims to examine the relationship between financial structure, lending capacity and financial performance of banks in UAE using fixed effect models during the period 2008-2018. Eight commercial banks operating in the financial market of UAE was selected. The study employs three performance indicators which are return on equity (ROE), return on assets (ROA), and net interest margin (NIM) to determine bank performance. The study provides evidence that lending capacity, percentage change in lending capacity, and total deposits affect the performance of the banks in UAE positively. Also, banks with greater market share obtain higher profits by pricing above competitive levels. On the other hand, total debt ratio related negatively with the bank performance. Accordingly, we recommend that banking managers plus policymakers should design prudent decisions aimed at reducing overreliance on debts to yield optimal capital structure levels to enable banks to remain at the top of the profitability game competitively in the banking sector.