Determinant Factor of Banking Credit and Its Effect on Profitability of Indonesian Commercial Bank, Listed in Indonesia Stock Exchange

Abstract

Banking Industry having a vital role as a financial intermediary must be able to compete in order to be survive and always get the profitability growth. Profitability has become one of the challenges faced by commercial banks to strengthen their financial position to face risks associated with the openness and flow of globalization. The purpose of this study was to analyze the effect of the Spread of Interest Rate, LDR, NPL, and CAR, as determinant factor of banking credit on profitability at commercial banks listed on the Indonesia Stock Exchange 2014-2018. This research applied a quantitative approach and multiple linear regression analysis. The data used in this study were obtained from the 2014-2018 annual financial statements of the commercial banks, listed on the Indonesia Stock Exchange. The results showed that Spread of Interest Rate (SIR), NPL, and CAR, except for LDR has effect on profitability at commercial banks. These findings imply that bank managers must pay attention to how much interest must be paid to the third parties. Also, commercial bank managers continue to improve higher banking deposits in order to reduce funding gaps, must be careful in managing risk mitigation to avoid the high NPL, and focus on managing the debt collection.