Internal Factors and Profitability of Islamic Commercial Banks

Abstract

This study aims to examine the impact of internal factors on the profitability of Islamic Commercial Banks operating in Indonesia during the 2020–2023 period. Bank profitability is measured using Return on Assets (ROA), which reflects a bank's ability to generate earnings from its total assets. The independent variables analyzed in this study include the Capital Adequacy Ratio (CAR), Financing to Deposit Ratio (FDR), Non-Performing Financing (NPF), and the Operating Expenses to Operating Income Ratio (BOPO). These variables were selected because they represent key aspects of capital adequacy, liquidity, financing quality, and operational efficiency that may influence a bank's financial performance. The population consists of all Islamic Commercial Banks registered with and supervised by the Financial Services Authority (OJK). Of the 13 banks in the population, 11 met the purposive sampling criteria and were selected as the research sample. This study utilizes secondary data obtained from annual financial reports. Multiple linear regression analysis was employed to examine the relationships between the research variables. The findings reveal that CAR and BOPO have a significant negative effect on ROA. In contrast, FDR has a significant positive effect on ROA, while NPF is not found to have a significant effect on the profitability of Islamic Commercial Banks.