Bank Profitability Determinants on Bank Specifications and Macroeconomics Moderated with Market Concentration: Bank KBMI 3 and 4 (2020-2024)

Rini Rini; Bekman Siagian

doi:10.55927/eajmr.v4i10.423

Authors

Rini Rini Institut Keuangan Perbankan Dan Informatika Asia
Bekman Siagian Institut Keuangan Perbankan Dan Informatika Asia

DOI:

https://doi.org/10.55927/eajmr.v4i10.423

Keywords:

Bank Profitability, Inflation, Market Concentration

Abstract

This study investigates the impact of bank-specific and macroeconomic factors on the profitability of conventional commercial banks in Indonesia and examines the moderating role of market concentration. The analysis employs panel data from 18 banks categorized under KBMI 3 and KBMI 4 during the 2020–2024 period, with a total of 90 observations, using the Random Effect Model approach in EViews 12. The results indicate that NPL has a significant negative effect on both ROA and ROE, whereas LDR positively and significantly influences profitability. CAR shows a negative and significant effect on ROE but is insignificant for ROA. Regarding macroeconomic variables, GDP has a positive and significant impact on ROE, while inflation negatively affects both profitability indicators. Moreover, market concentration plays a selective moderating role strengthening the effects of LDR and GDP on profitability but weakening the influence of inflation, while its moderation on NPL and CAR is insignificant.

References

Adiatmayani, P. I. A., & Sedana, I. B. P. (2020). The effect of credit risk and operational risk on profitability with capital adequacy variables as a mediating variable: A study on Indonesian state-owned banks for the period of 2015–2019. Russian Journal of Agricultural and Socio-Economic Sciences (RJOAS), 7(115), 14–25. https://doi.org/10.18551/rjoas.2021-07.02

Alvian, D., & Soenhadji, I. M. (2025). Determinants of bank profitability in Indonesian stock exchange. Journal of Economics, Finance and Management Studies, 8(2), 1254–1262. https://doi.org/10.47191/jefms/v8-i2-47

Badan Pusat Statistik. (2024). Produk Domestik Bruto (GDP). BPS RI. https://www.bps.go.id

Balagobei, S. S., & Arun, M. (2023). Impact of credit risk and bank-specific factors on the financial performance of licensed banks in Sri Lanka. Journal of Accountancy & Finance, 102, 1–15. https://doi.org/10.57075/jaf1022302

Bangun, S. D. P. (2008). Pengaruh kepemilikan bank terhadap profitabilitas, struktur modal, likuiditas, kualitas aset, dan pencadangan risiko (Tesis, Universitas Indonesia). Universitas Indonesia Library.

Bank Indonesia. (2013). Peraturan Bank Indonesia nomor 15/7/PBI/2013 tentang perubahan kedua atas peraturan Bank Indonesia nomor 12/19/PBI/2010 tentang giro wajib minimum bank umum pada Bank Indonesia dalam rupiah dan valuta asing. Jakarta: Bank Indonesia.

Bank Indonesia. (2020). Statistik Perbankan Indonesia. Bank Indonesia.

Bank Indonesia. (2024). Statistik Perbankan Indonesia. https://www.bi.go.id

Bank for Internasional Settlements. (2024). Laporan Tahunan 2024. BIS. https://www.bis.org/publ/arpdf/ar2024e.htm

Bank for International Settlements. (2024). Annual economic report 2024. https://www.bis.org

Canta, C., Nilsen, Ø. A., & Ulsaker, S. A. (2023). Competition and risk taking in local bank markets: Evidence from the business loans segment. Journal of Empirical Finance, 73, 153–169. https://doi.org/10.1016/j.jempfin.2023.06.003

Chand, S. A., Kumar, R. R., Stauvermann, P. J., & Shahbaz, M. (2024). Do institutions, globalization, and global uncertainty matter for banks in island economies? The case of Fiji. Journal of Risk and Financial Management, 17(6), 218. https://doi.org/10.3390/jrfm17060218

Chia, W. L., Khong, R. W. L., Lim, P., & Ang, P. M. M. (2023). Credit card delinquency in Malaysia. Bulletin of Monetary Economics and Banking, 26(0), 127–146. https://doi.org/10.59091/1410-8046.2060

Cobbinah, B. B., Yang, W., Sarpong, F. A., & Nyantakyi, G. (2024). From risk to reward: Unveiling the multidimensional impact of financial risks on the performance of Ghanaian banks. Heliyon, 10, e40777. https://doi.org/10.1016/j.heliyon.2024.e40777

Ikatan Akuntan Indonesia. (2020). Pernyataan standar akuntansi keuangan (PSAK) 71: Instrumen keuangan. Ikatan Akuntan Indonesia.

Otoritas Jasa Keuangan. (2017c). Surat Edaran OJK Nomor 14/SEOJK.03/2017 tentang penilaian tingkat kesehatan bank umum. Jakarta: OJK.

Otoritas Jasa Keuangan. (2019). Peraturan OJK nomor 40/POJK.03/2019 tentang penilaian kualitas aset bank umum. Jakarta: Otoritas Jasa Keuangan.

Otoritas Jasa Keuangan. (2021). POJK No. 12/POJK.03/2021 tentang Konsolidasi Bank Umum. Jakarta: OJK.

Otoritas Jasa Keuangan. (2024). Statistik Perbankan Indonesia 2024. https://www.ojk.go.id

Patra, B., & Padhi, P. (2024). Risk, capital, and inefficiency: A study of public sector, private, and foreign banks in India. Bulletin of Monetary Economics and Banking, 27(2), 327–350. https://doi.org/10.59091/2460-9196.1778

Permata, S. U., & Dewi, R. K. (2022). The effect of capital adequacy ratio (CAR), LDR, and non-performing loans (NPL) on return on asset (ROA) in banking companies listed on the Indonesia Stock Exchange during the period of 2016-2020. Journal of Scientific, Research, Education, and Technology, 1(2), 359–368.

Pertiwi, A. D. (2024). The effect of CAR, NPL and LDR on the profitability of regional development banks in Java for the period 2018-2023. IJME Journal, 3(2), 103–114.

Pervez, M., Ali, A., Naveenan, R. V., & Bansal, R. (2023). Impact of capital adequacy and risk on bank performance: An empirical study. AIP Conference Proceedings, 2871(1), 020007. https://doi.org/10.1063/5.0150407

Prayoga, R., Pakki, E., & Aswan, A. (2022). Analysis of the effect of CAR and NPL on profitability with LDR as variable intervening (Case study on commercial banks listed on the IDX period 2018-2020). Hasanuddin Journal of Applied Business and Entrepreneurship, 5(2), 49–56.

Priharta, A., & Gani, N. A. (2023). Determinants of bank profitability: Empirical evidence from Republic of Indonesia state-owned banks. Contaduría y Administración, 69(3), 49–65. https://doi.org/10.22201/fca.24488410e.2024.4999

Psaila, A., Spiteri, J., & Grima, S. (2019). The impact of non-performing loans on the profitability of listed Euro-Mediterranean commercial banks. International Journal of Economics and Business Administration, 7(4), 150–163. https://doi.org/10.35808/ijeba/338

Pyka, I., & Nocoń, A. (2021). Bank risk capital and its effectiveness in Euro area banking sectors. Journal of Risk and Financial Management, 14(11), 555. https://doi.org/10.3390/jrfm14110555

Radovanov, B., Milenković, N., Kalaš, B., & Marcikić Horvat, A. (2023). Do the same determinants affect banks profitability and liquidity? Evidence from West Balkan countries using a panel data regression analysis. Mathematics, 11(19), 4072. https://doi.org/10.3390/math11194072

Rakshit, B., & Bardhan, S. (2022). Does bank efficiency enhance bank performance? Empirical evidence from Indian banking. Bulletin of Monetary Economics and Banking, 25(Special Issue), 103–124. https://doi.org/10.21098/bemp.v25i0.1844

Riyanti, R. S., Wulandari, P., Prijadi, R., & Tortosa-Ausina, E. (2025). Green loans: Navigating the path to sustainable profitability in banking. Economic Analysis and Policy, 85, 1613–1624. https://doi.org/10.1016/j.eap.2025.01.028

Safuan, S., Sugandi, E. A., Aziz, O. Q., & Triandhari, R. (2022). Indonesia’s financial stress events and macroeconomic dynamics. Bulletin of Monetary Economics and Banking, 25(3), 323–370. https://doi.org/10.21098/bemp.v25i3.1743

Sari, E. Y., & Chariri, A. (2025). Capital adequacy, credit risk, operational efficiency and profitability: Liquidity as an intervening variable in national private commercial banks. The International Journal of Social Sciences World, 7(1), 103–118. https://doi.org/10.5281/zenodo.15064524

Sari, L. F., Alfarisi, F., & Adrianto, F. (2022). The influence of credit risk, liquidity risk, and capital adequacy on financial performance in the banking sector listed on the Indonesia Stock Exchange 2016-2020 period: Before and during Covid-19. Enrichment: Journal of Management, 12(4), 2913–2917.

Saunders, A., & Cornett, M. M. (2021). Financial institutions management: A risk management approach (10th ed.). McGraw-Hill Education.

Seho, M., Bacha, O. I., & Smolo, E. (2024). Bank financing diversification and profitability: Evidence from banking sectors in developing countries. Pacific-Basin Finance Journal, 85, 102461. https://doi.org/10.1016/j.pacfin.2024.102461

Zheng, L., Mirza, N., Umar, M., & Su, C. W. (2025). Sustainable lending to European SMEs: Implications for bank performance. International Review of Economics and Finance, 102, 104283. https://doi.org/10.1016/j.iref.2025.104283