COMPARATIVE ANALYSIS ON DETERMINANTS OF PROFITABILITY OF DOMESTIC AND FOREIGN BANKS IN INDONESIA (EMPIRICAL STUDIES ON COMMERCIAL BANKS USING MONTHLY REPORT OF BANKS FINANCIAL STATEMENTS PERIOD OF 2014.1-2015.12)

Abstract

Profitability has an important role for bank sustainability, profitability is one of the most important pillars for bank in running their activities. Bank in generating profit, there are some things that must be considered, for instance is determinant factors that will affect the growth of profitability. By knowing the determinant factors of profitability, banks will be more prudent in doing strategies for generating greater profit and to face the unpredictable circumstances. The purposes of this research are to analyse the influence of Total Assets, Equity, Loan Loss Provisions, Off-Balance Sheet Activities, Overhead Costs, and Lagged Profitability to Profitability (ROA and NIM) of Domestic and Foreign Banks that operating in Indonesia period of 2014 – 2015, and also this research will present the comparative analysis of both bank groups (domestic and foreign). The population of this study were 66 Domestic Banks and 39 Foreign Banks (commercial banks) operating in Indonesia. This research also used monthly report of banks financial statements over the period of 2014(1)-2015(12). In the fact, data of monthly reports will provide more complete and accurate information to give a better result. This study used the cross-section method in taking the population. The results of this research had found various results, proving that the determinant factors used in this research had an influence on Foreign and Domestic Banks profitability. But there were some results that were not in accordance with the hypotheses that had been made. From this research also obtained, that there was a difference between influence of determinants factors to Domestic Banks profitability with influence of determinant factors to Foreign Banks profitability.