Determinants of Profitability in State-Owned Islamic Banks: Evidence from Indonesia, Malaysia, and Brunei Darussalam

Fathan Munim; Firman

doi:10.32332/ijie.v8i01.13143

Authors

Fathan Munim Institut Agama Islam Negeri Pontianak, Indonesia
Firman Institut Agama Islam Negeri Pontianak, Indonesia

DOI:

https://doi.org/10.32332/ijie.v8i01.13143

Keywords:

Panel Data Quantile Regression; ROA; ROE; State-Owned Islamic Banks.

Abstract

Objective: This study aims to examine the factors that determine the profitability of state Islamic banks (Indonesia, Malaysia, and Brunei Darussalam). Method: This research uses an associative quantitative approach. The data used comes from State-Owned Islamic Banks in 3 countries (Indonesia, Malaysia, and Brunei Darussalam) from 2015 to 2024, sourced from Bank Syariah Indonesia (BSI), Bank Islam Brunei Darussalam (BIBD), and Bank Islam Malaysia Berhad (BIMB). The data were analyzed using panel data quantile regression in EViews. Result: This study found that NPF has a negative and significant effect on the ROE of state-owned Islamic banks, whereas CIR, CAR, and FDR have positive and significant effects on the ROE of state-owned Islamic banks. The second result shows that ROE, NPF, and CIR have a negative and significant effect on ROA, while CAR and FDR variables have a positive and significant effect on ROA. Based on the results of the quantile and Sobel regression tests, it is clear that NPF, CIR, CAR, and FDR variables influence the ROA of state-owned Islamic banks, either directly or through ROE. Implication: This study emphasizes the need to strengthen profitability risk-based policies among institutions in Indonesia, Malaysia, and Brunei Darussalam to enhance the competitiveness of state-owned sharia banks in the region. Originality or Novelty: The originality of this research lies in using Return on Equity (ROE) as a mediating variable and, at the same time, employing panel data quantile regression, where ROE mediates the relationship between the profitability of state-owned Islamic banks and Return on Assets (ROA).

Downloads

Download data is not yet available.

References

Abdulai, S. K., & Umar, S. (2024). The Impact of Capital Adequacy and Bank Size on Profitability of Ghanaian Banks. MPRA Paper, 2(12).

Abdussamad, Fitria, A., & Akmal, Ri. (2025). The Influence Of Liquidity, Solvency, and Financing Distribution On The Profitability Of Islamic Commercial Banks In Indonesia (Period 2022-2024). Jurnal Akuntansi dan Keuangan (JAK), 30(2).

Abrevaya, J., & Dahl, C. M. (2022). The Effects of Birth Inputs on Birthweight. Journal of Business & Economic Statistics, 26(4), 379–397. https://doi.org/10.1198/073500107000000269

Ahmad, I., Sajada, Yameen, M., & Khan, E. (2025). Non-Performing Assets And Capital Adequacy In Banks : Insights From The Literature. International Journal of Advanced Research (IJAR), 13(11), 199–210. https://doi.org/10.21474/IJAR01/22104

Al-sharkas, A. A., & Al-sharkas, T. A. (2022). The Impact On Bank Profitability : Testing For Capital Adequacy Ratio, Cost-Income Ratio And Non-Performing Loans In Emerging Markets. Journal of Governance and Regulation, 11(1), 231–243. https://doi.org/10.22495/jgrv11i1siart4

Al Almer, A., & Hidayah, N. (2023). The Effect of FDR, ROE, ROA, and NPF on Profitability in Indonesian Sharia Commercial Banks. Proceedings International Economics and Business Conference, 1(1 SE-Articles), 9–17. https://doi.org/10.35912/iecon.v1i1.124

Alex, I., Rebecca, N., & University Research Repository Extension, M. (2024). Relationship Between Operating Efficiency And Return On Assets: A Case Study Of Uganda. 3, 70–80.

Alkindi, M., & Utami, W. (2025). in Southeast Asian Islamic banks ” A comparative study of Islamic conformity , profitability , and green performance in Southeast Asian Islamic banks. https://doi.org/10.21511/bbs.20(1).2025.15

Amoa, K., Joseph, G., Coleman, A., & Emi, O. (2025). Financial sustainability and credit risk : evidence from listed banks in Ghana. SN Business & Economics, 5(7), 1–24. https://doi.org/10.1007/s43546-025-00861-4

Asmare, E., & Begashaw, A. (2018). Review on Parametric and Nonparametric Methods of Efficiency Analysis. Crimson Publishers, 2(3), 1–7. https://doi.org/10.31031/OABB.2018.02.000534

AAziz, L., Siregar, H., Achsani, N., & Irawan, T. (2025). The Role of Capital Adequacy Ratio in Enhancing Regional Development Banks’ Stability: An Empirical Study from 2012-2022. Eduvest - Journal of Universal Studies, 5, 6120–6130. https://doi.org/10.59188/eduvest.v5i6.51304

Barakat, H. A., Elwahab, S. A., Yassin, N. M., Mohamed, S., Ibrahim, M., Ismail, M. H., Waled, N., & Eldin, S. (2024). Asset Quality And Banks Performance : A Panel Data Analysis Of Commercial Banks. 14(3), 111–121. https://doi.org/10.22495/rgcv14i3p11

Basnawati, S. R. (2022). Analisis Faktor-Faktor Yang Mempengaruhi Profitabilitas Pada Bank Umum Syariah Di Indonesia. Jurnal Economina, 1(2 SE-Articles), 219–227. https://doi.org/10.55681/economina.v1i2.52

Bitar, M., Pukthuanthong, K., & Walker, T. (2018). The effect of capital ratios on the risk, efficiency and profitability of banks: Evidence from OECD countries. Journal of International Financial Markets Institutions and Money, Forthcoming. https://doi.org/10.1016/j.intfin.2017.12.002

Cheng, C., Spiegelman, D., & Li, F. (2023). Is the Product Method More Efficient Than the Difference Method for Assessing Mediation? American Journal of Epidemiology, 192(1), 84–92. https://doi.org/10.1093/aje/kwac144

Chernozhukov, V., Galvao, A. F., He, X., & Xiao, Z. (2019). Quantile regression. Journal of Econometrics, 213(1), 1–3. https://doi.org/https://doi.org/10.1016/j.jeconom.2019.04.002

Chowdhury, M. A. M., & Haron, R. (2022). The efficiency of Islamic Banks in the Southeast Asia (SEA) Region. Future Business Journal, 7, 1–16. https://doi.org/10.1186/s43093-021-00062-z

Çollaku, B., & Aliu, M. (2021). Impact of Non-Performing Loans on Bank’s Profitability: Empirical Evidence from Commercial Banks in Kosovo. Journal of Accounting, Finance and Auditing Studies, 7, 226–242. https://doi.org/10.32602/jafas.2021.027

Connect, F. S. I. (2019). The capital buffers in Basel III – Executive Summary. 1–2.

Daulay, M. A., Satriana, D., & Ardiansyah, M. (2025). Determinants of Return on Equity in Sharia Bank in Indonesia. Al-Bank: Journal of Islamic Banking and Finance, 5(2 SE-Articles), 135–150. https://doi.org/10.31958/ab.v5i2.15812

Endrajati, N. P., & Anggraeni, A. (2025). Profitability Determinants of Islamic Banks in Indonesia: The Role of Foreign Ownership. Jurnal Ekonomi, 30(2 SE-Articles), 335–357. https://doi.org/10.24912/je.v30i2.3136

Evoney, G., & Margaretha, F. (2024). The Effect of Credit Risk Management on the Financial Performance of Banks Listed on the IDX. Jurnal Ilmiah Manajemen Kesatuan, 12, 933–938. https://doi.org/10.37641/jimkes.v12i4.2658

Fajri, M. Z. N., Rofiqo, A., Rizqon, A. L., & ` R. H. (2023). The Impact of MSMEs Financing in Islamic Bank on Unemployment in Indonesia. Jurnal Ekonomi Syariah Teori Dan Terapan, 10(5), 443–454. https://doi.org/10.20473/vol10iss20235pp443-454

Fathiyyah, S. N., & Muflih, M. (2023). Determinants of Islamic Banking Profitability: A Comparative Analysis of Indonesia and Malaysia . Jurnal Ekonomi Syariah Teori Dan Terapan, 10(4 SE-Articles), 391–402. https://doi.org/10.20473/vol10iss20234pp391-402

Firdaus, V. S., & Budianto, E. W. H. (2024). Pengaruh Penerimaan Dana ZISWAF, NPF Gross, dan Pendapatan Mudharabah terhadap ROE Dengan Firm Size sebagai Variabel Moderasi pada Perbankan Syariah di Indonesia Periode 2018 Q1-2023 Q3. Istithmar, 8(2 SE-Articles), 102–127. https://doi.org/10.30762/istithmar.v8i2.1511

Hamza, A., Ermaini, & Suryani, A. I. (2025). The Effect of Non-Performing Financing (NPF) on Return on Assets (ROA) at Bank Muamalat in Indonesia. Jurnal Development, 13(2 SE-Management), 440–447. https://doi.org/10.53978/jd.v13i2.704

Handayani, D., Rosyidah, N., & Rani, R. (2024). Pengaruh Npf, Fdr, Car, Bopo Terhadap Roe Bank Syariah. Izdihar: Jurnal Ekonomi Syariah, 4(01 SE-Articles), 48–56. https://doi.org/10.32764/izdihar.v4i01.3820

Hendrawan, M. H., Defung, F., & Wardhani, W. (2023). Un / desired impact of capital buffers : Evidence from Indonesian bank profitability and risk-taking Un / desired impact of capital buffers : Evidence from Indonesian bank profitability and. Cogent Economics & Finance, 11(2). https://doi.org/10.1080/23322039.2023.2245217

Hessou, H., & Lai, V. S. O. N. (2017). Basel III Capital Buffer Requirements and Credit Union Prudential Regulation: Canadian Evidence. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2815731

Husen, S. D., Fuji Hakiki, M., & Ibrahim, A. W. (2025). Analysis Of Profitability Determinants In Islamic Banks In Indonesia And Malaysia. Ad-Deenar: Jurnal Ekonomi Dan Bisnis Islam, 9(01 SE-Articles), 101–116. https://doi.org/10.30868/ad.v9i01.7820

Irawan, P., Damayanti, E., Putri Pratama, R., Denita Siagian, L., & Hanggraeni, D. (2025). Operational Risk and Bank Profitability: Analyzing BOPO and Efficiency Ratios in Indonesian Commercial Banks. Jurnal Pendidikan Indonesia, 6(1 SE-Articles), 338–346. https://doi.org/10.59141/japendi.v6i1.6775

IIzza, M. Y. H. N., & Putri, A. Z. (2024). Comparative Effects Of Profitability And Risk Management On Financial Stability In A Dual Banking System : Does Yield Matter ? Jurnal Ilmu Ekonomi Terapan, 9(2), 201–220. https://doi.org/10.20473/jiet.v9i2.58254

Kithandi, C. (2025). Theory Of Financial Intermediation: A Millenial Perspective Of Theory And Practice. 12, 1–12. https://doi.org/10.5281/zenodo.14677499

Kusuma, V., & Budhidharma, V. (2025b). Exploring Proxies of Bank Profitability in Indonesia from 2012 to 2023. Jurnal Ilmiah Multidisiplin Indonesia (JIM-ID), 4(04), 140–152. https://doi.org/10.58471/esaprom.v4i04

Linggadjaya, R. I. T., Atahau, A. D. R., Ugut, G. S. S., & Suk, K. S. (2024). Faktor Penentu Profitabilitas Bank Tercatat Di Indonesia : Pendekatan Dengan Regresi Kuantil. Jurnal Proaksi, 11(1), 1–20. https://doi.org/10.32534/jpk.v11i1.5246

Lukman, I., & Rahma, M. (2021). Pengaruh CAR Dan NPF Terhadap Roe Bank Umum Syariah (BUS): (Studi kasus pada Bank Umum Syariah di Indonesia periode 2015-2019). Maro: Jurnal Ekonomi Syariah Dan Bisnis, 4(2 SE-Articles), 36–44. https://doi.org/10.31949/maro.v4i2.1283

Maharanie, K., Waliyah, D., & Leon, F. (2026). The Effect of Bank-Specific Factors on the Profitability of Conventional Banks Listed on the Indonesia Stock Exchange. Dialektika : Jurnal Ekonomi Dan Ilmu Sosial, 11, 148–161. https://doi.org/10.36636/dialektika.v11i1.8542

Mala, C. M. F., & Jumono, S. (2025). Credit Risk Management via Capital Adequacy : Insights on Stability from Indonesia Regional Banks. Jurnal Ilmiah Manajemen Kesatuan (JIMKES), 13(4), 2293–2304. https://doi.org/10.37641/jimkes.v13i4.3175

Mardoyan, A., & Saegsyan A, H. (2025). Research Article Basel Iii Capital Reforms And Bank Stability In A Changing Manuscript Info Abstract Issn :( O ) 2320-5407 , Issn ( P ) 3107-4928 Introduction : - Literature Review : -. International Journal Of Advanced Research (IJAR), 13(12), 336–343. https://doi.org/10.21474/IJAR01/22359

Masdjojo, G. N. (2023). banking sector ” The relationship between profitability and capital buffer in the Indonesian banking sector. https://doi.org/10.21511/bbs.18(2).2023.02

Molla, M. I., Mustary, M., Rahaman, M. K. Bin, Biswas, N., & Das, S. R. (2025). Does revenue diversification lead to greater stability and profitability of banks? Empirical evidence from Bangladesh. LBS Journal of Management & Research, 23(2), 169–185. https://doi.org/10.1108/LBSJMR-07-2024-0074

Mulyawisdawati, R., & Inayati, A. (2025). The Impact of Financial Ratio Indicators on Profitability in Sharia Banks in Indonesia Period 2019-2023. Ekonomica Sharia Jurnal Pemikiran Dan Pengembangan Ekonomi Syariah, 11, 133. https://doi.org/10.36908/esha.v11i1.1572

Munteanu, I., & Ilie, C. A. M. (2022). The Use of ROA and ROE in Study of a Bank’s Profitability. Ovidius University Annals. Economic Sciences Series, 21, 1078–1083. https://doi.org/10.61801/OUAESS.2021.2.145

Nabillah, L., & Tristanto, T. A. (2025). Pengaruh Return on Assets, Return on Equity, dan Net Profit Margin Terhadap Pertumbuhan Laba pada Subsektor Bank Swasta Konvesional yang Terdaftar di Bursa Efek Indonesia (BEI) Periode 2020-2024. AKSIOMA : Jurnal Sains Ekonomi Dan Edukasi, 2(10 SE-Articles), 2405–2416. https://doi.org/10.62335/aksioma.v2i10.1877

Ngo, H. K., & Trinh, H. T. T. (2025). The impact of financial risks on bank performance : evidence from Bayesian analysis in Vietnam ’ s commercial banks. Discover Sustainability, 4(5). https://doi.org/10.1007/s43621-025-01246-1

Obeid, R. (2023). Determinants of Capital Adequacy Ratio in the Banking Sector: Evidence from the Arab Region. International Journal of Business and Management, 18, 63. https://doi.org/10.5539/ijbm.v18n5p63

Pangeran. (2025). Pengaruh Likuiditas, Permodalan, Kualitas Kredit, dan Pertumbuhan Kredit Terhadap Kinerja Bank dengan Efisiensi BOPO sebagai Variabel Mediasi (Studi pada Bank yang Terdaftar di BEI Tahun 2014–2024). Journal of Capital Markets and Banking, 13(4 SE-Articles), 94–118. https://doi.org/10.63607/jcmb.v13i4.42

Parasdya, Y., & Raharja, S. (2024). Relationship Between Credit Risk Management And Bank-Specific Factors on Financial Performance Of ASEAN-5 Banks. Indonesian Interdisciplinary Journal of Sharia Economics (IIJSE), 7(3 SE-Articles). https://doi.org/10.31538/iijse.v7i3.4938

Pham, N. H., Hoang, T. M., Thi, N., & Pham, H. (2022). The impact of capital structure on bank profitability : evidence from Vietnam The impact of capital structure on bank profitability : evidence from Vietnam. Cogent Business & Management, 9(1). https://doi.org/10.1080/23311975.2022.2096263

Powell, D. (2022). Quantile regression with nonadditive fixed effects. Empirical Economics, 63(5), 2675–2691. https://doi.org/10.1007/s00181-022-02216-6

Rahmawati, Z., & Pratiwi, R. S. (2025). The Role of CAR as a Mediating Variable in the Impact between NPF and FDR on ROA of Islamic Banks. Jurnal Manajemen Bisnis Dan Kewirausahaa (Jamanika), 05(02). https://doi.org/10.22219/jamanika.v5i2.41556

Rehman, S., Wani, I., Khanam, M., & Ali, Y. S. (2021). A Brief Review of Growth and Development in Islamic Banking. 12(3), 15–25. https://doi.org/10.9790/5933-1203041525

Rita, S. D., & Sugiarti, D. (2025). Islamic performance index and profitability with the moderating role of intellectual capital in Indonesian Islamic banks. Economics, Finance, and Business Review, 2(1 SE-Articles), 43–54. https://doi.org/10.20885/efbr.vol2.iss1.art5

Safenida, W., & Vestari, M. (2023). Pengaruh Leverage, Profitabilitas, Arus Kas Operasi, Intellectual Capital, Dan Risiko Bisnis Terhadap Financial Distress. Jurnal Ilmiah Edunomika, 7(2 SE-Articles). https://doi.org/10.29040/jie.v7i2.10185

Sany, M. A. I., & Lata, R. S. (2025). The Impact of Revenue Diversification on Bank Performance and Risk: Evidence from Bangladesh. International Journal of Financial, Accounting, and Management, 7(1 SE-Articles), 125–139. https://doi.org/10.35912/ijfam.v7i1.2843

Sari, K., & Fauzan, F. (2025). The impact of financial ratios on bank profitability: evidence from idx (2021-2023). Law and Economics, 19(2 SE-Articles), 95–105. https://doi.org/10.35335/laweco.v19i2.145

Setiawan, J. A., & Budiwitjaksono, G. S. (2024). The Influence Of LDR , ROE , NIM , And BOPO On Changes In Banking Company Profits ( Empirical Study On Banking Sector Companies Listed On The Indonesia Stock Exchange ( IDX ) 2018-2022 ). Jurnai Ekonomi, 13(02), 2018–2022. https://doi.org/10.54209/ekonomi.v13i02

Suryawan, T. (2024). The Influence of Return On Assets (ROA), Return On Equity (ROE), and Non-Performing Loans (NPL) on Profit Growth in Banking Companies from 2021 to 2023. Daengku: Journal of Humanities and Social Sciences Innovation, 4(3 SE-Articles), 508–515. https://doi.org/10.35877/454RI.daengku2586

Susanto, F., Adib, N., & Prastiwi, A. (2024). The Impact Of Revenue Diversification On Bank Profitability And Stability: Evidence From Indonesia Banking Industry. Jurnal Reviu Akuntansi Dan Keuangan, 14. https://doi.org/10.22219/jrak.v14i4.36770

Widarjono, A., & Sidiq, S. (2022). JEBIS : Jurnal Ekonomi dan Bisnis Islam The Sectoral Financing Diversification And The Profitability. 8(2), 201–219. https://doi.org/10.20473/jebis.v8i2.36316

Yubileus, F., Azazi, A., & Mustika, U. N. (2025). Profitabilitas sebagai Mediator Pengaruh Risiko , Modal , Tata Kelola , dan Efisiensi terhadap Pertumbuhan Laba Bank. 1(3), 121–136.

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