The Effect Of Interest Rates And Operating Costs On Banking Profitability

Abstract

Abstracts The background of declining profitability reflects the urgency to evaluate the determinants of a company's success in generating profits, particularly in banking. External factors such as interest rates and internal factors such as operational costs can influence business activities in obtaining profits for a bank. Fluctuations in interest rates affect the cost of funds and interest income, while operational cost efficiency determines a bank's competitiveness. The aim of this research is to test and prove the influence of interest rates and operational costs on banking profitability both partially and simultaneously. The research sample consists of conventional banks listed on the Indonesia Stock Exchange for the period 2021-2023, totaling 33 banks. The sampling technique used is purposive sampling. The research method employed is quantitative research with a causal associative approach using multiple linear regression analysis with SPSS 22. The results of this study indicate that: (1) Interest rates have a positive and insignificant effect on banking profitability, (2) Operational costs have a negative and significant effect on banking profitability, and (3) Interest rates and operational costs simultaneously have a significant effect on banking profitability. The conclusion of this research underscores the importance of contributing to regulators, bank management, and investors in maintaining stability and performance in the banking sector in Indonesia