THE INFLUENCE OF MACROECNOMIC FACTORS TOWARD BANK PROFITABILITY: A COMPARISON STUDY OF STATE-OWNED COMMERCIAL BANKS IN CHINA AND INDONESIA

Abstract

This study analyzes the influence of macro-economic factors (including the interest rate, inflation rate, GDP growth rate, composite index and money supply) toward the state owned banks ‘profitability. Meanwhile, this is a comparison study of the state-owned commercial banks in China and Indonesia. This study is important because NIM is the indicator indicates the ratio of bank net interest to total interest-bearing assets balance. The larger the ratio, the stronger the corresponding bank profitability. This study is a quantitative study using panel data generalized least squares (GLS) regression in STATA; and using secondary data that generated from China and Indonesia 6 (totally is six) state-owned commercial banks annual report during 2014-2016. The findings show that interest rate, composite index and money supply have positive and significant influence to increase bank profitability, the GDP growth rate also has positive influence but not significant. However, the inflation rate has negative influence toward the bank profitability, but it is not significant.