Journal of Business and Management Sciences
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Journal of Business and Management Sciences. 2015, 3(4), 118-123
DOI: 10.12691/jbms-3-4-3
Open AccessArticle

Banking Profitability: How does the Credit Risk and Operational Efficiency Effect?

Herry Achmad Buchory1,

1EKUITAS Economics College, Jl. PHH. Mustopa No. 31 Bandung 40124, Indonesia

Pub. Date: October 17, 2015

Cite this paper:
Herry Achmad Buchory. Banking Profitability: How does the Credit Risk and Operational Efficiency Effect?. Journal of Business and Management Sciences. 2015; 3(4):118-123. doi: 10.12691/jbms-3-4-3


The aim of this study was to analyze the effect of credit risk and operational efficiency to the banking profitability. Credit risk as measured by non performing loans (NPLs), operational efficiency as measured by ratio of operating expense to operating income (OEOI) and banking profitability as measured by return on assets (ROA). The method used is descriptive and verification method, with secondary data from financial statements of 26 Regional Development Bank in Indonesia as a research object units. Data analysis technique is the multiple linear regression, hypothesis testing while using T - test to examine the effect of partial variables and F - test to examine the effect of variables simultaneously with a significance level of 5 %. Based on the results, it is concluded that the partial, NPLs has positive and significant effect to ROA; While the OEOI has negative and significant effects to the ROA Simultaneously that variable of NPLs and OEOI significantly influence to ROA variable with the level of 57.1%, while the remaining 42.9% thought to be influenced by other variables not examined in this study.

non-performing loans (NPLs) ratio of operating expenses to operating income (OEOI) return on assets (ROA)

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