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This study aims to investigate the determinants of banking stability in the case of QISMUT + 3 countries (Qatar, Indonesia, Malaysia, United Arab Emirates, Turkey, Pakistan, Kuwait and Bahrain). Both profitability of banks and non-performing loans were treated as dependent variables. Three variations are examined, the sample as a whole and separated to conventional banks (CBs) and Islamic banks (IBs).

Data from 208 banks, both IBs and CBs, were used from 2011 to 2018, after global financial crisis period. Two-step system generalized methods of moments and both feasible least squares and panel-corrected standard error models were used to ensure test the data.

Results suggest that both financial vulnerability and profitability affect each other in both banking systems. In addition, capital adequacy has a positive link with both dependent variables. Corruption varied and followed expectations but for the case of CBs alone with an unexpected negative relationship with profitability.

The findings are expected to help bankers, investors, academics and policymakers gain a better understanding of Islamic banking. The findings would be useful in developing policy for the development of the banking industries in these countries.

This study contributes to existing literature in three ways. First, this study investigates the factors influencing banking non-performing loans for a new class of countries – QISMUT + 3 within 2011–2018 period. Second, only a few studies use such a period, which is after the global financial crisis period. Finally, new indicators are used to determine the non-performing loans and profitability of both types of banks, such as Muslim Share and Share of IBs.