Financial Determinants of Profitability in State-Owned Banks: Evidence from Indonesia's Banking Sector

Abstract

This study aims to analyze the effect of liquidity, capital adequacy, and cost efficiency on the profitability of State-Owned Banks (BUMN) in Indonesia during the period 2021–2025. The research employed a quantitative approach using secondary data obtained from the annual reports of four state-owned banks, namely Bank Rakyat Indonesia (BRI), Bank Mandiri, Bank Negara Indonesia (BNI), and Bank Tabungan Negara (BTN). The variables examined include Liquidity measured by Loan to Deposit Ratio (LDR), Capital Adequacy measured by Capital Adequacy Ratio (CAR), Cost Efficiency measured by Operational Expenses to Operational Income (BOPO), and Profitability measured by Return on Assets (ROA). Data were analyzed using multiple linear regression with SPSS 29. The results indicate that liquidity has no significant effect on profitability, while capital adequacy has a positive and significant effect on profitability. Cost efficiency shows a negative but insignificant relationship with profitability. Simultaneously, liquidity, capital adequacy, and cost efficiency significantly influence profitability. The model explains 70.5% of the variation in profitability. These findings highlight the importance of maintaining adequate capital structures to improve bank performance and profitability.