The Effect of Credit Risk Management on Bank Profitability: Evidence from Listed Government-Owned Banks
DOI:
https://doi.org/10.59890/ijefbs.v4i3.9Keywords:
Credit Risk, Profitability, ROA, State-owned Bank, Operational EfficiencyAbstract
This study analyzes the influence of credit risk management on the profitability of state-owned banks listed on the Indonesia Stock Exchange (IDX) during the 2016–2025 period by employing credit risk indicators such as the Non-Performing Loan Ratio (NPL), Loan Loss Provision Ratio (LLP), Capital Adequacy Ratio (CAR), and Cost-to-Income Ratio (CIR), while profitability is measured using Return on Assets (ROA). A quantitative approach with panel data regression was applied to 40 observations from four state-owned banks. The results show that CAR has a positive effect on profitability, whereas CIR has a negative effect, highlighting the importance of capital strength and operational efficiency in enhancing bank performance. Meanwhile, NPL and LLP do not exhibit a significant influence on ROA. These findings provide empirical insights into the role of credit risk in shaping banking performance and offer practical implications for bank management and policymakers in strengthening risk management effectiveness within Indonesia’s banking sector.
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