English abstract
Banks are financial intermediaries who transform deposits into loans. Banks in the MENA
(Middle East and North Africa) region use large deposits from oil companies and big businesses to
finance trade, and fund government and private sector infrastructure projects. The role of banks
in financing trade and development is significant as undeveloped capital markets are unable to
perform this function. During the COVID-19 crisis, banks sustained liquidity shocks, as deposits were
withdrawn to meet personal and business needs. Essentially, banks could not make loans, as the funds
to make loans were depleted. The purpose of this study is to evaluate the effectiveness of liquidity
creation as a main force, in conjunction with other performance predictors such as efficient asset
management, asset quality, and bank size, on bank financial performance, either individually or in
conjunction with liquidity creation during the COVID-19 financial crisis. We used bank financial data
from a sample of 298 banks from 11 countries in the MENA region, including Egypt, Tunisia, Morocco,
Qatar, Bahrain, Oman, Kuwait, Saudi Arabia, United Arab Emirates, Jordan, and Israel, from 2020
to2021. Liquidity creation, efficient asset management, asset quality, and bank size increased bank
return on assets and return on equity. Bank size and asset quality acted jointly with liquidity creation
to increase return on assets and increase return on equity. We conclude that as liquidity creation
acts individually, and in conjunction with asset quality and bank size to increase bank profits, both
its main effect and its moderated effect, can maintain bank profitability, during periods of extreme
liquidity supply shocks, such as the COVID-19 crisis.
