The Effects of Bank Performance on Bank Profitability in Indonesia for the 2010-2022 Period

Abstract

This study aims to analyze the effect of banking performance on banking profitability in Indonesia during the period 2010–2022. The banking performance variables used in this research include Total Assets (TA), Capital Adequacy Ratio (CAR), Non-Performing Loans (NPL), Net Interest Margin (NIM), and Operational Expenses to Operating Income (BOPO). Banking profitability is measured using Return on Assets (ROA). This study employs panel data from four of the largest commercial banks in Indonesia, namely BCA, BRI, Mandiri, and BNI, using panel data regression analysis. The regression model selection was based on the Hausman Test, which identified the Random Effect Model (REM) as the most suitable.The results show that, simultaneously, the five independent variables have a significant effect on ROA. Partially, NIM has a positive and significant effect on ROA, while BOPO and CAR have a negative and significant effect. Meanwhile, Total Assets and NPL do not have a significant effect on ROA. The R-squared value of 93.29% indicates that the model is able to strongly explain the variation in ROA. These findings suggest that operational efficiency and the optimization of interest income are important factors in enhancing banking profitability.   Keywords: Total Aset, CAR, NPL, NIM, dan BOPO, terhadap ROA.