The Effect of Non-Performing Loan, Loan to Deposit Ratio, Net Interest Margin, and Capital Adequacy Ratio on Return on Asset in Private Banks Listed on the Indonesia Stock Exchange for the Period 2021–2025

Abstract

This study aims to analyze the effect of Non-Performing Loan (NPL), Loan to Deposit Ratio (LDR), Net Interest Margin (NIM), and Capital Adequacy Ratio (CAR) on Return on Asset (ROA) in private banks listed on the Indonesia Stock Exchange (IDX) during the 2021–2025 period. This research uses a quantitative method with secondary data in the form of annual financial reports. The study population consisted of 35 private banks, with a sample of 10 banks selected through purposive sampling, resulting in 50 observational data points. The data analysis technique used is multiple linear regression with the help of SPSS version 26. The results show that, simultaneously (F test), NPL, LDR, NIM, and CAR have a significant effect on ROA (F = 14.308, sig = 0.000 < 0.05), with a coefficient of determination (R²) of 0.560, or 56.0%. The partial test results (t test) show that NPL has a negative and significant effect on ROA (t = -4.576, sig = 0.000), while NIM (t = 2.309, sig = 0.026) and CAR (t = 2.450, sig = 0.018) each have a positive and significant effect on ROA. Meanwhile, LDR has a positive but not significant effect on ROA (t = 2.032, sig = 0.048, rounded to 0.05). These findings indicate that credit risk management, the ability to generate net interest income, and capital adequacy are key determinants of the profitability of the private banks studied.