The Influence of Internal Company Factors on Net Interest Margin and Return on Equity of Digital Banks in Indonesia
DOI:
https://doi.org/10.38035/dijefa.v7i4.5759Keywords:
Digital Banks, Internal Company Factors, Net Interest Margin and Return on EquityAbstract
The primary revenue of digital banks in Indonesia still relies on interest income earned from lending, in addition to fees and commissions. Therefore, the size of the net interest margin is crucial in calculating digital bank profitability, which will affect their return on equity. This study aims to examine factors affecting the net interest margin and return on equity of digital banks from an internal company perspective. The results of this study indicate that the net interest margin of digital banks is influenced by assets, the composition of low-cost funds, and the amount of non-performing loans. The greater the composition of low-cost funds, the lower the cost of funds and the smaller the non-performing loans, the higher the credit productivity which affects the greater net interest margin. The return on equity of digital banks is influenced by the level of capital and efficiency, namely the ratio of operating costs to operating income and its net interest margin. The large capital of digital banks and accompanied by savings in operating costs, provide room for digital banks to continue to grow and expand to increase profitability so that their return on equity is even greater.
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