Determinants of BPRS Profitability in West Java Province with NPF as a Moderating Variable

Abstract

This study aims to analyze the effect of financial ratios—measured by the Capital Adequacy Ratio, Financing-to-Deposit Ratio, Operating Expenses, and Operating Income—on profitability, specifically Return on Assets, with Non-Performing Financing as a moderating variable. The study employs a quantitative method using panel data regression and Moderated Regression Analysis on data from 27 Rural Banks (BPRS) in West Java Province over the 2015–2025 quarterly period. The results of the study indicate that CAR (p = 0.656 > 0.05) and BOPO (p = 0.988 > 0.05) do not have a significant effect on ROA; thus, profitability is determined more by the effectiveness of productive asset allocation than by capital strength and cost efficiency. FDR (p = 0.00 < 0.05) has a positive and significant effect, confirming that the effective allocation of funds increases profitability. Meanwhile, NPF as a moderating variable (p = 0.693 > 0.05) was not significant. All interaction terms had p-values greater than 0.05, indicating that NPF did not alter the direction of the relationship with ROA. Collectively, these findings (p = 0.00 < 0.05) indicate that ROA is influenced by CAR, FDR, BOPO, NPF, and interaction variables. This study highlights that the combination of FDR and BOPO is a key factor in profitability resilience. Policy makers OJK and DSAK need to collaborate in implementing more prudent capital regulation for BPRS while focused on the real sector, so that early monitoring of trends in inefficiency and liquidity can strengthen profitability resilience.