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Abstract

This study aims to analyze credit risk and other control variables on the profitability of conventional banks in Indonesia. Profit is measured by return on assets (ROA), and credit risk is measured by Non-Performing Loan (NPL). In addition, this study examines the moderation effect of the COVID pandemic through the interaction between NPLs and COVID on ROA. The study uses conventional bank panel data in Indonesia for the period 2015–2023 using quarterly data and a dynamic panel regression approach. The results of the study found that NPL negatively affected ROA. The assets, LDR, and CAR had a positive effect on ROA, while CIR, GDP, and COVID had a significant negative effect on ROA. Interestingly, the interaction between NPLs and COVID showed a positive influence, indicating that the pandemic encouraged increased risk management effectiveness and banking operational efficiency. The implications of the findings of the positive effects of the interaction between credit risk and the pandemic on bank profitability are the need to affirm the role of adaptive policies and credit restructuring in maintaining the performance of the banking sector in times of crisis.

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ROA NPL COVID-19

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Copyright (c) 2025 Aufa Al Zafir , Gugum Mukdas Sudarjah

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Al Zafir , A. ., & Sudarjah, G. M. (2025). Credit risk, COVID, and bank profitability in Indonesian conventional banks. Economics, Finance, and Business Review, 2(2), 78–87. https://doi.org/10.20885/efbr.vol2.iss2.art2
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