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The Effect Of Banking Intermediation, Credit Risk And Operational Efficiency On Profitability Study In Bank Tabungan Negara Persero, Tbk.
Period 2010 – 2015
Selvi Lusiana selvi.lusianayahoo.com Senior Manager at Bank Tabungan Negara Persero Tbk., Head Office Jakarta Indonesia;
Students of Master of Management Program, Faculty of Economics and Business, Universitas Padjadjaran
1. Introduction The role of banks which can be used as a tool in setting monetary policy is
also the primary source of credit to most small businesses and individuals, which will ultimately affect the economic growth of a country Koch, 2000;
Buchory, 2006. Banking plays such a major role in channeling funds to borrowers with productive investment opportunities. This financial activity
is important in ensuring that the financial system and the economy run smoothly and efficiently” Mishkin Eakins, 2006, p.425.
After going through a long history since its establishment in 1963, PT. Bank Tabungan Negara Persero Tbk, in 2002 was appointed by the government
as the commercial banks to focus on financing commercial house. As one of the commercial banks, BTN plays a very important role in the economy.
The role is mainly seen how wide BTN can apply intermediary function. Intermediation function performed by BTN through the process of
purchasing the surplus funds from economic units to be distributed to deficit economic units. One commonly used indicator to measure the
implementation of banking intermediation, is the ratio of loans to deposits or loans to deposits ratio LDR Haruna, 2011; Buchory, 2006. The higher
this ratio is, the better it means that the bank could carry out intermediation function optimally.
During the period 2010 to 2015 BTN has been carrying out intermediary function optimally. This is indicated by the level of loans to deposit ratio
LDR achieved in 2015 amounted to 108,78 higher than the national banks 92,11, state owned banks 88,58, foreign exchange banks
84,98, non-foreign exchange banks 85,95, regional development bank 92,19 but lower than joint venture banks 132,77. Services
Authority, Republic of Indonesia, Indonesian Banking Statistics Volume 14 No. 1 December 2015.
457 In carrying out the intermediation function BTN also have to make a profit
to sustain its business and provide welfare to the shareholders. The indicators used to measure the level of ability of banks is Return On Assets
ROA. ROA ratio is used to measure the ability of bank management in make a profit profit as a whole, the higher a banks ROA greater the level
of profit that the bank achieved and the better the banks position in terms of utilization assets. High LDR should increase ROA.
The ROA achieved by the BTN period 2010 – 2015 amounted to 1,68 while ROA achieved December 2015 amounted 1,61 lower than the
national banks 2,32, state owned banks 3,31, foreign exchange banks 1,75, non-foreign exchange banks 1,65, regional
development bank 2,40 but higher than joint venture banks 1,01. Services Authority, Republic of Indonesia, Indonesian Banking Statistics
Volume 14 No. 1 December 2015. Thus, profitability achieved by the BTN becomes less optimal. The not optimal profitability by BTN is thought to
include the effect of the Loan to Deposits Ratio LDR. Besides LDR, NPLs and OEOI allegedly also cause low ROA. The NPLs achieved by the BTN
period 2010 – 2015 amounted to 4,13 while NPLs achieved December 2015 amounted 3,42 higher than the national banks 2,56 and other
state owned banks, that is Bank BRI 2,02, Bank BNI 2,70 and Bank Mandiri 2,29. While levels of operational efficiency are
indicated by Operating Expense to Operating Income Ratio OEOI levels of operational efficiency as indicated by OEOI achieved by BTN period 2010
- 2015 is 84,38 and OEOI achieved December 2015 amounted 84,83 higher than the national banks 81,49, state owned banks 72,58,
regional development bank 79,57 but lower than foreign exchange banks 84,98, non-foreign exchange banks 86,81 and joint venture
banks 87,55. Based on the phenomenon above, the problem in this research can be
formulated into a research question: Does LDR, NPLs and OEOI effect on Profitability ? This study aims to analyze the effect LDR, NPLs and OEOI to
the banking profitability measure by ROA.
458 2. Literature review
2.1. Definition and factors of affecting banking profitability Bank is an organization that combines human effort and financial
resources to carry out the functions of the bank in order to serve the needs of the community and to make a profit for the owners of the bank
Hempel, 1994. The main purpose of banks, reaching the maximum level of profitability in conducting its operational activities. Profitability
describes the companys ability to profit through all the capabilities of existing sources Harahap, 2015. To measure the ability of bank
management in gain profit overall use ratios Return on Assets Dendawijaya, 2009. The larger a banks ROA greater the level of profit
that the bank achieved and the better the banks position in terms of utilization assets.
2.1.1. Return On Assets ROA Return on Assets ROA is an important indicator of the financial
statements which have a variety of uses. The greater this ratio indicates better performance of banks Taswan, 2010. According to Bank Indonesia
Circular Letter No. 1324 DNDP 2011, Return on assets ROA is a ratio that assess how the rate of return on assets. Based on Bank Indonesia
regulation, adequate ROA is above 1,25. ROA will be used as a guide in measuring the profitability of banks by the Bank Indonesia as a banking
supervisor, because ROA is an objective measurement method that is based on the data available to the bank about how banks have been
managing the assets of the funds come from the public. 2.1.2.The effect of LDR on the ROA
Intermediation is the process of transformation or direct purchases of a claim with a series of characteristics maturity, denomination of Defisit
Spending UnitsDSUs and turn it into a claim indirectly by a different set of characteristics to be sold to Surplus Spending UnitsSSUs Hempel et al.,
1994; Kidwell and Petterson, 2000. The implementation of financial intermediation in banking can be seen from the banks ability to transform
savings received primarily from household economic units into credit or loans for companies and others to invest in buildings, equipment and other
capital goods Rose, 2013.The indicators commonly used to measure the extent of intermediation by the banking system has been implemented,
459 namely by looking at the ratio of loans to deposits known as Loans to
Deposits Ratio LDR. Therefore, a banks LDR is determined by the banks ability to collect and distribute funds to third parties in the form of credit.
The higher the LDR showed greater use of bank deposits for lending, which means bank has been capable to run intermediary function properly. LDR
ratio reflects the ability of banks to extend credit and collect public funds. The higher this ratio is, the better it means that the bank could carry out
intermediation function optimally. Vice versa, the lower this ratio means the bank in carrying out its intermediary function is not optimal. According
to the research result Buchory 2006 implementation of financial intermediation function give effect to banking performance. This means
that banks will have good financial performance if the bank could apply its intermediary function optimally. However, if the LDR is too high can also
rise a profitability for banks. The implementation of financial intermediation gives effect to banking profitability. Nusantara 2009
research result showed LDR in partial influenced significant toward ROA bank non go public at level of significant less than 5.Similarly, the
research result of Prasanjaya 2013, CAR significantly influence the profitability. Then, according Artarina 2013, CAR have significant effect on
ROA. And research result of Vong 2009,LDR have significant effect on ROA. Similarly according to Widati 2012, Loan to Deposit Ratio are
significant positive influence to the Return On AssetROA. And Restiyana 2011, LDR has positive and significant impact on ROA in the banking firm.
While, according Arimi 2012 research result showed Loan to Deposit Ratio LDR hasn’t significant positive effect to Return On Asset ROA.
Similarly, the research result of Purwoko 2013 LDR whereas no significant effect on ROA.
2.1.3. The effect of NPLs on the ROA Credit is the greatest asset investment and the largest source of revenue
for banks. If the credit fails then the ability of banks to provide new loans will be limited. Besides bank revenue derived from loan interest will
decrease and banks should establish loan loss reserves and finally will reduce the banks profitability. Credit risk or credit quality of a bank is
indicated by the Non Performing Loans NPLs. Thus, NPLs can be used to measure the ability of banks to cover the risk of default of loan repayment
by the debtor. Based on Bank Indonesia Circular Letter No. 1324DPNP on October 25, 2011 concerning the Commercial Banks, problem loans are
loans to a third party of non bank consist of non performing loan sub
460 standard, doubtful and loss. The higher the level of NPLs, the greater the
credit risk borne by the bank. NPL rate may affect the level of bank profitability. The research Karim 2008 states in Malaysia and Singapore,
clearly indicate that higher non-performing loan reduces cost efficiency. According to some previous research results stated that credit risk or NPLs
have significant negative impact on the profitability and growth of the Banking sector Adeusi, 2014; Sinha, 2014; Arimi, 2012; Ahmad, 2014;
Puwoko, 2013; Manikam , 2013; Eng, 2013; Nusantara, 2009; Artarina, 2013; and Restiyana, 2011. While according the research of Oktaviantari
2013, NPL influenced positive but it is not significant towards profitability ROA
2.1.4. The effect of OEOI on ROA Operational efficiency is essential for banks to increase the rate of profit to
be achieved One ratio that is commonly used to measure the level of bank efficiency is the ratio of operating expenses to operational income OEOI
in the same period. Bank Indonesia Circular Letter No.623DPNP2005 subject : Rating System for Commercial Banks regulate OEOI ratio range
from 94 to 97. If the bank achieved the ratio of OEOI below 94 then the level of operational efficiency is very good. And vice versa. According to
some previous research results stated that the operational efficiency OEOI has a positive and significant effect on bank profits as measured by
ROA Sinha, 2014; Nusantara, 2009; Prasanjaya, 2013; Francis, 2013; Manikam, 2013; Artarina, 2013; And Widati, 2012; While the results of
another study stated that the operational efficiency has a significant negative effect on bank profits as measured by ROA Purwoko, 2013;
Oktaviantari, 2013; Wibowo, 2013; Chatarine, 2014; Restiyana, 2011; 2.2. Hypothesis
Based on the relationship between research objectives and theoretical framework to the formulation of the research problem, the research
hypothesis are as follows: H1 : LDR positive effect on ROA
H2 : NPLs negative effect on ROA H3 : OEOI negative effect on ROA
H4 : LDR, NPLs, and OEOI effect on ROA
461 3. Research method
3.1. Research method The methods used in this research are descriptive method and verification
method. Descriptive method is a method used to analyze data in a way to describe the data that has been collected as is without intending to apply
general conclusions or generalizations while the verification method is a method of research that aims to determine the relationship between the
independent variables, namely LDR, NPLs and OEOI to the dependent variable is the banking profitability as measured by the ROA. This
verification method is used to test the truth of a hypothesis. Influence or shape the causal relationship between variables X and Y can be known
from the research method of verification. Sugiyono, 2009 3.2. Type, data source, and data collection methods.
Data used in this study is secondary data PT. Bank Tabungan Negara Pesero, Tbk. which include LDR, NPLs, OEOI, and the ROA were obtained
from the Indonesian Banking Statistics Volume 14 No. 1 December, 2015 and Financial Statement Publications period 2010 – 2015 calculated
quarterly. Data collection method used was to study the documentation. Study of documentation is done with the data collection and classification
category of written materials related to the research problem. 3.3. Analysis Techniques Data
The data analysis technique used in this study is a multiple linear regression. First, it is tested to determine whether the assumptions of classical linear
regression model doesn’t have problem of normality, multicoloniarity, heteroscedastisity and autocorrelation. If all of them were fulfilled means that
the model has a decent analysis used Gujarati, 2003. To examine the hypothesis was used T-test to determine statistical significance of the effect
of independent variables on the dependent variable partially, F-test to determine the statistical significance of the coefficient of multiple significance
or F-test to determine significance of the independent variables on the dependent variable simultaneously. Data processing is done by using the
software Statistical Package for Social Science SPSS version 21.0 for Windows. The regression equation used is as follows:
Y = a + βX
1
+ βX
2
+ βX
3
+ e 1
462 Where,
Y = Return On Assets ROA a = A constant which is the value of the variable Y when the variable X is
0 zero β = Coefficient of the regression line
X
1
= Loans to Deposits Ratio LDR X
2
= Non Performing Loans NPLs X
3
= Operating Expense to Operating Income OEOI e = Residual
4. Result and discussions 4.1. The development ROA, LDR, NPLs and OEOI PT. Bank Tabungan
