The Effect of Capital Adequacy Ratio, Net Interest Margin and Non-Performing Loans on Bank Profitability: The Case of Indonesia

Pasaman Silaban
International Journal of Economics & Business Administration, Volume V, Issue 3, 58-69, 2017

Abstract:

The purpose of this study is to test and determine the Bank's health level consisting of capital adequacy ratio (CAR), net interest margin (NIM), and non performing loans (NPL) partially or simultaneously on bank profitability based on data from the Indonesian Stock Exchange.The population of this study is all state and private banks listed in the Indonesian Stock Exchange (ISE) amounting to 40. Observations are conducted from 2012 to 2016.The results indicate that capital adequacy ratio (CAR) does not have a significant effect on bank profitability. Net interest margin (NIM) improves the growth of bank profitability.This can happen because NIM has a component of net interest in its ratio. Non performing loans (NPL) have a negative effect on bank profitability.


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