THE PROFITABILITY DETERMINANTS OF CONVENTIONAL AND ISLAMIC BANKS IN INDONESIA

Abstract

The main object of this study is to investigate the internal factors that influence the profitability between conventional banks and Islamic banks in Indonesia over the quarterly period 2011-2016. The study involved all five conventional commercial banks and five Islamic commercial banks by using secondary data from Financial Services Authority of Indonesia (OJK). The test was adopted to examine ROA (Return On Asset) as the dependent variable and CAR (Capital Adequacy Ratio), LDR/FDR (Loan to Deposit Ratio/Financing to Deposit Ratio), NPL/NPF (Non-Performing Loan/Non-Performing Financing) as the independent variables. The result of multiple linear regression analysis indicated there was a positive significant impact of CAR and LDR on ROA in conventional bank. Meanwhile for Islamic banks found that NPF was significant but negatively impact on ROA. On the other hand, CAR and FDR had no significant effect on ROA of Islamic banks. Further the study revealed the significant different of each variables between conventional banks and Islamic banks in Indonesia.