Determinants of Banking Industry Profitability:  an Empirical Research of Indonesia Financial Institutions

Johan, Suwinto

doi:10.24034/j25485024.y2021.v5.i2.4666

Cited by 3 publications

(6 citation statements)

References 34 publications

(36 reference statements)

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“…The decline in bank credit accompanied by an increase in the NPA number indicates that banking conditions in Indonesia are experiencing a decline in performance. An increase in NPA will have an impact on bank profitability (Johan, 2021;Lestari & Setianegara, 2020;Nurhasanah & Maryono, 2021) and bank efficiency (Riani & Maulani, 2021). This should be a concern for the government considering that the banking industry has an important role in moving the wheels of the economy.…”

Section: Source: Ojk (2021)mentioning

confidence: 99%

The Macro-Prudential Policy and Bank Non-Performing Assets in Indonesia

Gustriani

Suhel²,

Melliny³

et al. 2023

keuang. dan. bisnis.

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<em><span lang="EN-US">This study examines the effect of the Macro-prudential Intermediation Ratio (MIR) as an instrument of Bank Indonesia's macro-prudential regulation on Non-Performing Assets (NPA) as one of the banking industry performance indicators in Indonesia. In addition, this study also examines several other independent variables such as bank assets as an indicator of bank size, Bank Indonesia interest rates (BI rate), and inflation as macroeconomic indicators and their effect on NPA. The NPA, MIR, and bank asset data used in this study consist of 109 commercial banks operating in Indonesia during the period from January 2015 to December 2020. This study uses an Ordinary Least Square (OLS) analysis approach by undertaking classical assumption tests and statistical tests. The results show that (1) MIR, bank assets, BI rate, and inflation simultaneously have a significant effect on NPA (2) Partially, bank assets have a negative and significant effect on NPA while other variables including macro-prudential policy have no significant effect on NPA (3) Variable MIR, bank assets, BI rate, and inflation can explain variations of NPA variable by 34% (4) Larger bank size encourages prudent financing and reduces NPA.</span></em>

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Section: Source: Ojk (2021)mentioning

confidence: 99%

The Macro-Prudential Policy and Bank Non-Performing Assets in Indonesia

Gustriani

Suhel²,

Melliny³

et al. 2023

keuang. dan. bisnis.

View full text Add to dashboard Cite

show abstract

“…Bank profitability is not only influenced by internal factors but also external factors, namely macroeconomic indicators (Siregar et al, 2014). Internal factors of Islamic banks include liquidity, capital, financing risk, efficiency, and bank size (Johan, 2021;Pradhan & Pandey, 2018;Setiawan, 2021;Widarjono et al, 2022) while external factors include economic growth, inflation, exchange rates. , and interest rates (Al-Jafari & Alchami, 2014;Katusiime, 2021;Messai et al, 2015;O'Connell, 2022;Winny & Yulfiswandi, 2022;Yao et al, 2018).…”

Section: Literature Reviewmentioning

confidence: 99%

“…, and interest rates (Al-Jafari & Alchami, 2014;Katusiime, 2021;Messai et al, 2015;O'Connell, 2022;Winny & Yulfiswandi, 2022;Yao et al, 2018). Johan (2021) states that the main determinant of profitability is bad loans. The higher the non-performing loan, the bank will require high bank reserve requirements it will suppress profitability.…”

Section: Literature Reviewmentioning

confidence: 99%

“…This study uses 12 research proxies (Al-Homaidi et al, 2018;Alshatti, 2016;Derbali, 2021;Hunjra et al, 2020;Johan, 2021;Majumder & Li, 2018;Setiawan, 2021) which is presented in Table 2.…”

Section: Nomit=β0+β1fdrit+β2carit+β3npfit+β4cirit+β5sizeit+β6gdpt+β7i...mentioning

confidence: 99%

“…This will lead to good customer response to Islamic banking so that profitability increases. Capital adequacy or bank capital ratios can be proxied using the capital adequacy ratio (CAR) (Johan, 2021) and equity to total assets (ETA) (Aliyu & Yusof, 2016). The higher the capital adequacy, the profitability will increase (Alhempi & Zainal, 2016;Aliyu & Yusof, 2016;Alshatti, 2016;Messai et al, 2015).…”

Section: Introductionmentioning

confidence: 99%

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Covid-19 and the Performance of Islamic Banks in Indonesia

2022

ijibm

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Covid-19 has an impact on the profitability of Islamic Banks in Indonesia. Islamic banks' profitability in Indonesia tends to decline during a covid-19 outbreak. Although declining, the profitability indicators measured by Return on Asset and Net Operating Margin are more stable than Return on Equity. The average Return on Equity declined sharply in the fourth quarter of 2021. This study aims to analyze the determinants of the profitability of Islamic banks, including internal bank factors and macroeconomic indicators during the covid-19 outbreak. This study uses a quantitative approach with the fixed effect method. This study employs panel data from 8 Islamic commercial banks from 2020q1 to 2021q4. The results show that capital adequacy, disbursed financing, and operational efficiency has a negative and significant effect on the profitability of Islamic banks. Financing risk and bank size have no significant effect on the profitability of Islamic banks. Macroeconomic indicators such as economic growth, inflation, interest rates, and exchange rates have no significant effect on the profitability of Islamic banks. During the covid-19 pandemic, to increase profitability, banks need to reduce the capital and financing provided to customers. On the other hand, to increase profitability, Islamic banks need to reduce unnecessary costs so that income is not eroded. Macroeconomic indicators do not influence the performance of Islamic banks. This shows that Islamic commercial banks are more resistant to economic turbulence.

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Bank Profitability in Indonesia During COVID-19 Outbreak

Khalifaturofi’ah,

Listyarti,

Poerwanti

et al. 2024

jbmp

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This study examines the factors of conventional bank profitability during the COVID-19 outbreak in Indonesia, using data from 52 conventional banks from 2020 Q1 to 2021 Q4. Using a fixed-effects model, bank-specific and macroeconomic factors are examined. The findings show that liquidity and bank size have a beneficial impact on profitability, whereas efficiency has a considerable negative effect. Additionally, non-performing loans have a favorable link with profitability. Notably, macroeconomic indices such as interest rates have a substantial impact on bank profitability, while capital, exchange rates, inflation, and economic growth do not. The study emphasizes the necessity of improved liquidity management, efficient operations, and strategic interest rate management in maintaining bank profitability and resilience in the face of disruptive occurrences

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Determinants of Banking Industry Profitability: an Empirical Research of Indonesia Financial Institutions

Cited by 3 publications

References 34 publications

The Macro-Prudential Policy and Bank Non-Performing Assets in Indonesia

The Macro-Prudential Policy and Bank Non-Performing Assets in Indonesia

Covid-19 and the Performance of Islamic Banks in Indonesia

Bank Profitability in Indonesia During COVID-19 Outbreak

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