The Relationship Between Net Interest Margin and Return on Asset: Empirical Study of Conventional Banking in Indonesia

Puspitasari, Elen; Sudiyatno, Bambang; Aini, Nur; Anindiansyah, Gladis

doi:10.36941/ajis-2021-0090

Cited by 14 publications

(15 citation statements)

References 13 publications

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“…Brei, Mohan, and Strobl (2019) discussed intermediation activity of the banking sector in low interest rate due to the natural hazards and cause widespread destruction and disruption in economic activity. Puspitasari, Sudiyatno, Hartoto, and Widati (2021) empirically studied net interest margin (NIM) as a proxy of market risk and established relationship with non-performing loan (NPL) as a proxy of credit risk; higher NIM produces less paying capacity in the borrowers and banking industry ends at NPLs. Butola, Dube, and Jain (2022) discusses the statistical finding indicates that in the presence CRM policies bank's profitability increases and NIM has a negative relationship.…”

Section: H1: Crm Index Positively Affects Bank's Performancementioning

confidence: 99%

Credit Risk Management Can Gear Up Bank Performance – Moderating Effect of Interest Rate in Developed Countries

Saleem

Masood

2023

iRASD J. Eco.

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This research explores the role of interest rate as a moderator in credit risk management, influencing the performance of banking industry in selected developed countries using a two-step GMM model. The annual data of the top 10 banks of the selected 10 developed countries ranging from 2001 to 2020 was used. The developed countries or G-10 are Belgium, Canada, France, Germany, Italy, Japan, Sweden, Switzerland, the United Kingdom, and the United States, which are the originators of the Basel Accords. Bank performance, proxied by ROA, ROE, ATO, and NPM, is dependent. Interest rate is a moderator, independent and indexed, developed after netting off lending interest rate (LIR), interest rate spread (IRS) & net interest margin (NIM). The credit risk management index (CRM index) was derived after netting off the effects of extra ordinary financing of net loans and leases, negativity of nonperforming loans, and secured cushioning of risk-weighted assets. The results confirmed that CRM improves the growth of banking, especially in case of ROA, ROE, and NPM, improves more by the induction of the moderator of the interest rate index and enhances more with the induction of the interaction. This research guides for rearranging the determinants of CRM, identifying loopholes of CRM, fixing interest rates, and looking after natural fixation of interest rate. CRM policies should be stringent, security analysis must be centralized, offered interest rate must be natural and savings must be used in a productive usage rather than multiple financing at lower interest rates. The research contributed two indexes, the CRM index and the interest rate index (IR index), which were developed by NPLs, NLLs, RWAs and LIR, IRS, and NIM, respectively. The results highlighted that loanable fund theory is starving without remedial measures of CRM for leakage of “credit”, drainage of “capital” or seepage of “money”. The researcher selected ten developed countries with the 10 highest scoring banks in a period of 2001-2020 and used a two-stage GMM technique.

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Section: H1: Crm Index Positively Affects Bank's Performancementioning

confidence: 99%

Credit Risk Management Can Gear Up Bank Performance – Moderating Effect of Interest Rate in Developed Countries

Saleem

Masood

2023

iRASD J. Eco.

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“…Loans Granted to Customers: Loans granted to customers refer to the total loans granted by the bank. According to Puspitasari et al (2021), loans granted to customers compare the size of a bank loan to its deposits to analyze the bank's funding strategy. Funding can come from customer deposits or the wholesale markets (in the form of demand deposits, savings accounts, time deposits, time deposits certificates, and other immediate obligations in the form of credit).…”

Section: Dimensions Of Financial Inclusionmentioning

confidence: 99%

Financial Inclusion and Financial Performance of Deposit Money Banks in Nigeria

Appah¹,

S.F.²

2023

African Journal of Accounting and Financial Research

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This study investigated the relationship between financial inclusion and financial performance of deposit money banks in Nigeria from 2011 to 2021. The specific objectives were to investigate the relationship between customers loan and return on assets of deposit money banks in Nigeria; determine the relationship between customers deposit and return on assets of deposit money banks in Nigeria; evaluate the relationship between bank branches spread and return on assets of deposit money banks in Nigeria; ascertain the relationship between online banking and return on assets of deposit money banks in Nigeria; and investigate the relationship between agent banking and return on assets of deposit money banks in Nigeria. The study employed ex post facto and correlation research design with secondary data obtained from the Central Bank of Nigeria and financial institutions of deposit money banks. The population of the study consisted of all listed deposit money banks and a sample size of ten (10) was employed for data analyzing using univariate, bivariate and multivariate analysis. The results indicated a positive and significant relationship between loans to customers, deposits by customers, bank branches, mobile banking and agency banking on return on assets of deposit money banks. The study concluded that financial inclusion positively influences the level of financial performance of deposit money banks. On the basis of the conclusion, the paper recommended amongst others that financial inclusion innovation methods should be stressed in the financial sector through Central Bank of Nigeria (CBN) regulatory and advisories since it leads to improved financial performance and efficiency. In addition, the study also recommends that deposit money banks in Nigeria should invest more on agency, internet banking and ATM services to include the excluded people in financial services and products throughout the country since they provide significant influence on the financial performance of deposit money banks.

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“…NIM is a calculation between interest income earned by the bank against earning assets. The NIM also reveals how much interest the bank earns on its loans compared to how much it pays on deposit interest (Puspitasari et al, 2021). The criteria for assessing the NIM rating are presented in the table below.…”

Section: Earningsmentioning

confidence: 99%

“…The proxy used in the capital aspect is the Capital Adequacy Ratio (CAR). CAR shows a minimum capital adequacy ratio, a high CAR indicates the bank can withstand other unexpected losses, on the other hand a low CAR indicates that the bank does not have enough capital to meet obligations and mitigate risks associated with its assets (Puspitasari, et al, 2021). The criteria for assessing the CAR rating are presented in the table below.…”

Section: Capitalmentioning

confidence: 99%

Analysis of Bank Soundness Level at Regional Development Bank of Bali for 2012 to 2021

2023

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The purpose of this study is to analyze the health level at RDB of Bali by using the Risk Based Bank Rating (RBBR) method. The RBBR method includes Risk Profile, Good Corporate Governance, Earnings, and Capital (RGEC). A quantitative descriptive approach was used to analyze. The variables in this study are the Risk Profile includes the ratio of Non Performing Loans (NPL) and Loan to Deposit Ratio (LDR), Good Corporate Governance (GCG) uses the composite value of GCG, Earnings includes the ratio of Return on Assets (ROA) and Net Interest Margin (NIM) and Capital includes the Capital Adequacy Ratio (CAR). Data were collected from annual reports for the period 2012 to 2021. The results showed that RDB of Bali obtained a composite rating of 2, which means the bank is in a healthy condition.

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The Relationship Between Net Interest Margin and Return on Asset: Empirical Study of Conventional Banking in Indonesia

Cited by 14 publications

References 13 publications

Credit Risk Management Can Gear Up Bank Performance – Moderating Effect of Interest Rate in Developed Countries

Credit Risk Management Can Gear Up Bank Performance – Moderating Effect of Interest Rate in Developed Countries

Financial Inclusion and Financial Performance of Deposit Money Banks in Nigeria

Analysis of Bank Soundness Level at Regional Development Bank of Bali for 2012 to 2021

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