Analysis of the Effect of Credit Provision and Credit Risk on Profitability

Abstract

This study aims to analyze the influence of credit granting and credit risk on profitability levels (a case study of banks listed on the Indonesia Stock Exchange for 2017-2020). The credit granting variable is measured using the logarithm of the total amount of credit granted, while the credit risk variable is measured using the NPL (Non-Performing Loan) ratio. Profitability is calculated using the Return on Assets (ROA) ratio. The population in this study consists of all banking companies classified as publicly listed banking companies with shares listed on the IDX from 2017 to 2020. The sampling technique used is purposive sampling. After collecting companies according to the category, 40 were obtained. The analysis technique used is multiple regression analysis using SPSS. The results of this study prove that credit granting has a significant effect on profitability levels. The results of this study indicate that credit risk has a considerable positive impact on profitability levels. The results of this study suggest that credit granting and credit risk have a combined effect on profitability levels.