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This study aims to assess the impact of bank-specific factors and macroeconomic indicators on the net interest margin (NIM) of commercial banks in Indonesia. Data from Indonesian commercial banks are used. Data are collected from the banks’ annual reports and the Financial Services Authority (OJK) for the period 2008 to 2018. A panel data regression model is used to estimate the effect of bank-specific and macroeconomic factors. The results prove that the variables of Non-Performing Loans (NPL), Loan to Deposit Ratio (LDR), Return on Assets (ROA), Interest Rate (SBI), and Exchange Rate (FOREX) affect NIM. The exchange rate variable has a predominant effect, while the NPL factor has a less strong influence on NIM. The empirical evidence from this research is important for commercial banks in Indonesia to improve operational efficiency through NIM performance. Internal and external factors of a bank should be subject of attention of bank managers.

Impact of internal and external factors on the net interest margin of banks in Indonesia