Determinants of Indonesian banking profitability: Before and during the COVID-19 pandemic analysis

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The purpose of this paper is to substantiate the determinants of Indonesian banking profitability before and during the COVID-19 pandemic. Return on assets (ROA), return on equity (ROE), and net interest margin (NIM) were used to measure banking profitability. The research population is 43 banks listed on the Indonesia Stock Exchange in 2020. Purposive sampling has been used to determine the research sample. The criteria are banks issued annual reports during the observation period (2019–2020). The data collection method used is documentation. Data analysis techniques used are descriptive analysis methods and multiple regression analysis. The results of the study indicate that banks experienced a decrease in profitability during the pandemic compared to before the pandemic. ROA before the pandemic was 0.82 and dropped to 0.62 during the pandemic; ROE from 1.76 to 1.32; and NIM became 4.79 from 4.91. Other results show that only Capital Adequacy Ratio CAR and Non-performing Loans (NPL) can determine bank profitability (ROA and ROE) significantly, both before and during the pandemic (the coefficient is –0.112 and –4.856 for CAR; –0.977 and –0.913 for NPL). CAR and NPL influence profitability negatively. Meanwhile, size and liquidity are not able to significantly influence profitability of Indonesian banking (ROA, ROE, and NIM). Bank management that can control NPL well will have a significant impact on profitability.

Acknowledgment
We thank to Faculty of Economics and Business Universitas Diponegoro for the funding of research and publication.

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    • Table 1. Indonesian banking profitability before and during the COVID-19 pandemic
    • Table 2. Determinants of ROA before and during the pandemic
    • Table 3. Determinants of ROE before and during the pandemic
    • Table 4. Determinants of NIM before and during the pandemic
    • Conceptualization
      Abdul Rohman, Ahmad Nurkhin
    • Formal Analysis
      Abdul Rohman, Ahmad Nurkhin, Christian Wiradendi Wolor
    • Funding acquisition
      Abdul Rohman, Kusumantoro
    • Investigation
      Abdul Rohman, Hasan Mukhibad, Christian Wiradendi Wolor
    • Methodology
      Abdul Rohman, Ahmad Nurkhin, Hasan Mukhibad
    • Supervision
      Abdul Rohman, Kusumantoro
    • Validation
      Abdul Rohman, Ahmad Nurkhin, Hasan Mukhibad
    • Writing – original draft
      Abdul Rohman, Ahmad Nurkhin
    • Writing – review & editing
      Abdul Rohman, Ahmad Nurkhin, Hasan Mukhibad, Christian Wiradendi Wolor
    • Data curation
      Ahmad Nurkhin, Kusumantoro, Christian Wiradendi Wolor
    • Project administration
      Ahmad Nurkhin, Kusumantoro
    • Resources
      Ahmad Nurkhin, Kusumantoro, Christian Wiradendi Wolor
    • Software
      Ahmad Nurkhin, Hasan Mukhibad, Christian Wiradendi Wolor
    • Visualization
      Ahmad Nurkhin, Kusumantoro