The Influence of the Capital Adequacy Ratio, Net Interest Margin, Gross Domestic Product and Inflation on the Profitability of Islamic Banks in the Middle of the Pandemic Covid-19

Abstract

This study aims to analyze the influence of Capital Adequacy Ratio, Net Interest Margin, Gross Domestic Product, and inflation on the profitability of sharia banks that are listed on the financial services authority of Indonesia period 2010 to 2019. The population is the entire Islamic banks which are listed on the financial services authority the years 2010-2019. The sample was selected using purposive sampling and consists of 10 Islamic banks in accordance with the criteria. Methods of data analysis is Partial Least Square-Structural Equation Modeling (PLS-SEM). Path analysis is used to test hypotheses on the model that has been created. The results showed that the Net Interest Margin and Capital Adequacy Ratio is a determinant of the internal affects the Return on Assets. Net Interest Margin has a significant negative effect on Return on Assets but positive and significant effect on Return on Equity. The Capital Adequacy Ratio has positive and significant effect on Return on Assets but negatively affect Return on Equity. The results showed that the Gross Domestic Product as an external factor has a positive and significant effect on Return on Assets and Return on Equity, but inflation does not affect the Return on Assets and Return on Equity.