​Effects of NPL, NIM, and BOPO on ROA of Banks in the LQ45 Index

Abstract

Bank profitability may fluctuate substantially as credit quality, interest margin generation, and operating efficiency change, making Return on Assets (ROA) an important but potentially unstable indicator of bank performance. This study examined the effects of Non-Performing Loans (NPL), Net Interest Margin (NIM), and Operating Expenses to Operating Income (Beban Operasional terhadap Pendapatan Operasional/BOPO) on the Return on Assets (ROA) of banks included in the LQ45 Index of the Indonesia Stock Exchange during 2018–2024. A quantitative approach was employed using secondary data from annual reports, with five banking companies and 35 balanced-panel observations selected through purposive sampling. Panel-data regression was estimated using EViews 12, and the Chow, Hausman, and Lagrange Multiplier tests were used to select the appropriate model. The random-effects model was selected. The results show that NPL has a negative but insignificant effect on ROA, while NIM has a positive significant effect and BOPO has a negative significant effect. NPL, NIM, and BOPO jointly had a significant effect on the ROA. This study was limited to five LQ45 banking companies and three internal financial ratios. The findings contribute empirical evidence on bank profitability during the pre-pandemic, pandemic, and post-pandemic periods and provide a basis for future studies to consider additional bank-specific and macroeconomic factors.

Keywords

Non-Performing Loan Net Interest Margin Operating Expenses to Operating Income Random Effect Model Return on Assets