PREDICTING FACTOR OF BANK PERFORMANCE IN INDONESIA: INTERNAL AND EXTERNAL DETERMINANT OF 19 COMMERCIAL BANKS PERIOD 2008 – 2017

• Main Author: Rosa Imanuella (19015143), Theresia
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/31288
• Institution: Institut Teknologi Bandung

Similar to other developing countries, financial system in Indonesia is the main pillar of national economic growth. The major role of banks also supported by the fact that non-bank financial institutions in Indonesia still fund their business using banks as their intermediaries. By its given role, banks should consistently maintain their performance stability. For the past 10 years statistic data showing that banks maintain good portfolio as it has increasing trend line of total asset, liquidity and capital adequacy. However, better quality and increasing growth of banks asset does not follow by increase in profit proxy by ROA which instead show decreasing trend line. Thus, the research regarding bank performance important factor in Indonesia is important to help finding suitable strategy for Indonesian banking. <br /> <br /> In the same degree as other business, bank need to generate income to remain its wellness which reflect good bank performance thus the research employ profitability proxy by ROA and ROE to explain bank performance in Indonesia. Independent variables used for ROA Model are Net Interest Margin, Interest Coverage, Bank Size, Capital Adequacy, Nonperforming Loans, Loan to Deposit, Liquid Asset to Total Asset, and Gross Domestic Product while for ROE Model the author adding Equity Multiplier. <br /> <br /> Data gathered from Otoritas Jasa Keuangan and Bank Indonesia website cover 19 banks listed in BACB3 and BACB4 which controlling 75% of banking market, thus it can represent the Indonesia banking industry. Time period started from 2008 to 2017. The analysis is process using stepwise regression and Panel EGLS (Cross-Section Random Effect). Stepwise regression is important step to find variables which have strong relation to profitability. <br /> <br /> The findings of this study are in ROA Model, shows that CAR, LATTA, ICR, LDR, LNSIZE, and NIM have significant positive relation while LNGDP and NPL have significant negative relation with all independent variables have significant level of 0,01. For ROE Model, it shows that CAR, ICR, LATTA, LNSIZE, LDR, EQM, and NIM have positive significant relation while LNGDP and NPL have negative significant relation. CAR, ICR, LNSIZE, LDR, LNGDP, NPL, EQM and NIM have p-value lower than significant level of 0.01 while LATTA have p-value lower than significant level of 0,05. <br /> <br /> The author also find that net interest margin is showing strong relation with ROA means that earn ability of banks is the key to increase bank asset and suggested to carefully maintain liquidity to prevent high opportunity cost. NPL show strong relation for ROE Model as loans is indeed main source of income thus lowering NPL may display good banks loans portfolio to attract both costumer and investor. Thus, risk assessment is necessary to prevent future loss from nonperforming loans. The following study also use intercept analysis which show that PT. Bank Rakyat Indonesia Tbk have the highest level of return on asset besides other banks and PT. Bank Jabar Banten Tbk have the highest level of return on equity besides another bank.