Abstract
The study aimed to investigate the effect of third-party funds, credit risk, market risk, and operational risk on profitability in banking, especially on the banks included in BUKU 2 category simultaneously or partially. The sampling technique used in the study was saturated sampling. Therefore, a number of 54 banks was obtained as samples. The data in the study were quantitative data, namely in form of financial statements of banking companies included in BUKU 2 category for the period 2014–2017. The data were obtained from the websites of the concerned banks. The research method used was multiple linear regression analysis. In the study, to measure the third-party funds variable we used third-party fund (TPF) ratio, to measure the credit risk variable we used non-performing loan (NPL) and non-performing financing (NPF) ratio, to measure the market risk variable we used net interest margin (NIM) ratio, to measure the operational risk variable we used BOPO ratio, and to measure the profitability variable we used return on assets (ROA) ratio. The result of the study showed that partially third-party funds and credit risk had no significant effect on profitability, partially market risk had a significant positive effect on profitability, and partially credit risk had a significant negative effect on profitability. While simultaneously, third-party funds, credit risk, market risk, and operational risk had a significant effect on profitability.
Highlights
Banking plays a role in the economy of a country, Indonesia is no exception
Third-party funds do not have a significant effect on profitability in banks that are included in the BUKU 2 classification for the 2014–2017 period
Credit risk has no significant effect on the profitability in banks that are included in the BUKU 2 classification for the 2014–2017 period
Summary
The existence of banking sector is familiar, it plays more roles in society life because people currently tend to save their money, get loans, or make other transactions at banks. Banking itself is a legal entity that has obtained a permit to keep the customers’ money that is rechanneled to other customers or people in form of loans or other transactions. The classification of BUKU categories is based on the amount of basic capital a bank has. The banks included in the category have basic capital of IDR 1 trillion IDR to IDR 5 trillion. A bank is required to have good financial performance to make people or customers trust the bank and feel safer and sure to save their money or to make other transactions at the bank. One of the aspects assessed in banking financial performance is the profitability ratio. One of the methods to measure profitability ratio is using return on assets (ROA). Tulung, Saerang, and Pandia (2018), Karamoy and Tulung (2020) state the greater ROA, the better performance of the company because the level of return obtained is greater
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