Profitability Analysis of Sharia Commercial Banks in Indonesia

Abstract

This research aims to analysis the influence of the Capital Adequacy Ratio (CAR), Financing to Deposit Ratio (FDR), Non-Performing Financing (NPF), and Operational Costs and Operating Income (BOPO) on Return On Assets (ROA) that represent the Profitability of Sharia Commercial Banks between the period 2016 to 2020. The method of analysis was employed VECM (Vector Error Correction Model). The results of data analysis show that in the short-term estimation only the Capital Adequacy Ratio and Non-Performing Financing variables significantly affect the ROA of Sharia Banks. On the other hand, other independent variables such as Financing to Deposit Ratio and operating expenses operating income do not significantly affect the ROA of Sharia banks. The results of the longterm estimation of the CAR, NPF, and BOPO variables have a significant effect on the ROA of Sharia commercial banks, and only the FDR variable does not show a significant influence on the ROA of Sharia commercial banks. Furthermore, in the results of the Impulse Response Function in Islamic commercial banks, profitability represented by ROA responds to shocks from the CAR, FDR, NPF, and BOPO variables positively and the Variance Decomposition results in the observation period show that the more dominant in the first period is the ROA variable itself which affect the development of ROA and in the next period is influenced by variations in the dependent variable and other independent variables.