Determinants of Profitability in Indonesian Islamic Commercial Banks: The Effects of Operating Efficiency, Non-Performing Financing, and Financing-to-Deposit Ratio, 2021–2025

Abstract

This study examines the effects of Operating Expenses to Operating Income (BOPO), Non-Performing Financing (NPF), and Financing to Deposit Ratio (FDR) on Return on Assets (ROA) of Islamic Commercial Banks in Indonesia during 2021–2025. The study uses a quantitative associative approach and secondary data obtained from quarterly financial reports published by Islamic Commercial Banks and the Financial Services Authority. The sample consists of 13 Islamic Commercial Banks, with 260 quarterly observations. Panel-data regression is employed, and the Random Effect Model (REM) is selected based on the Chow, Hausman, and Lagrange Multiplier tests. The results show that BOPO has a negative and significant effect on ROA, while NPF has a negative but statistically insignificant effect. FDR has a negative and significant effect on ROA. Simultaneously, BOPO, NPF, and FDR significantly affect ROA. The model produces an R-squared of 0.477753 and an adjusted R-squared of 0.471632, indicating that the three independent variables explain 47.16% of the variation in ROA after adjustment, while the remainder is associated with factors outside the model